Love is the Air: Life Insurance
What is the Money Date? A weekly time to check in. 3 things we review and update: 1. Spending 2. Earning 3. Savings
“All you need is love. But a little chocolate now and then doesn’t hurt” – Charles M. Schultz
It is often said that when we love someone, we will do anything for them, including protect and provide for them. Today’s Money Date covers why life insurance is something everyone needs to consider as well as how much do you really need.
Everyone can have different reasons, but it all comes down to providing protection for your family, in case you are not there and can’t support them financially. I am about replacing your income.
Life insurance is often used to:
- replace income
- cover funeral expenses
- buy out a business partner’s share
- pay off debts
- pay off estate taxes
Types of life insurance:
- Permanent or Whole Life
This is the tricky question and it depends on who you ask. I like to look at it from two angles:
- Multiples of income – Take your income and multiply it by a certain income factor, depending on which age bracket you fall into. For example, the younger you are the higher the number is. Ex: Income is $100,000, age 35 – Income factor 25. So that’s $2,500,000 of coverage.
- Capital needs analysis – This is a more detailed and thought thru approach, because it looks at your actual family needs, such as: Income replacement, Debts, and Goals (college, retirement). Example: age 35 individual, who supposedly needs to have $2,500,000 coverage, actually doesn’t need that much coverage b/c he has no huge debts to cover (such as the mortgage).
There are plenty of resources online for you buy insurance. I would like you to be educated about what amount of coverage you actually need. When you do your research be sure to check out a few insurance companies to compare.