Updated: Oct 5, 2020
It's Life Insurance Awareness Month, so let's talk about it. Have you put this off and avoided the conversation with your spouse? If so, you are not the only one. This happens all too often. But let's examine why having life insurance may be right for you and your family.
When examining your potential need for life insurance, you need to assess your current financial status as well as your current and future financial obligations such as;
your current monthly bills (mortgage/rent, student loans, car payments, basic living expenses, retirement income, children's college fund(s), etc).
So the question is, do you have enough money in your investment accounts, retirement account(s), college savings account(s), and other savings accounts to cover your current and future financial obligations?
The best way to know this is by meeting with a financial planner and creating a financial plan, which includes a comprehensive review of your current financial state, future obligations and recommendations as to how you may potentially cover your shortfall.
Also, if you have an old life insurance policy, but don't know how much coverage you have or for how long, or what type of policy it is, you should have a financial planner review the policy, so you know whether or not you need to change/increase your policy amount or term.
Think of your finances as a seesaw. On one side you have your assets. On the other side, you have life insurance. The more assets you have to cover your obligations, the less life insurance you need to cover those obligations.
For example, if you have less than 20 years left to pay on your mortgage and your youngest child is 6 years old, you might consider a 20 year term life policy to bridge the gap between now and when you will have considerably less expenses. Of course, if you refinance and surprise....another chiquito comes along, you will need to revisit that policy as your life circumstances evolve.
Now if you are a two income household and you only need one income to pay your expenses, you may not need life insurance, at least for the time being. But most people do not fall into that category. So what is the first step to figuring out how much life insurance you may need?
Contact a financial planner and create a financial plan, which will shed light on any shortfalls in your current financial landscape.
Your financial planner will be able to recommend a few different insurance strategies, and guide you through the process of obtaining your policy.