Life insurance is very important, yet many Americans fail to purchase these insurance policies. There are several reasons why many Americans fail to purchase life insurance and one of those reasons is the fact that; most people believe life insurance is 3 times more expensive than the actual price. According to a 2012 study by LIMRA, 3 in 10 Americans (35 million) had no life insurance. The best option to find out the correct monthly premium cost of a life insurance policy is to reach out to a licensed life insurance agent.
September is life insurance awareness month. I’d like to discuss a new way to think about life insurance. Life insurance is about taking care of loved ones who must continue without you. That may consist of four major needs which are: income continuation, mortgage protection, a settlement fund, and an educational fund.
It may be necessary to help your loved ones continue a certain lifestyle without you and a life insurance policy can help with that. When inquiring about a life insurance policy, it would be wise to determine the following.
- What is your family’s desired income, knowing that your mortgage, educational fund, personal debt, and other expenses will be funded immediately.
- What monthly income would your family receive from other sources?
- Calculate the income to be replaced by subtracting the monthly amount in step 2 from the desired income in step 1.
Your home is likely your largest asset. A well-tailored life insurance policy can help your family remain in the home as well as protect your established life plan. One important number your family would need to establish when structuring a life insurance policy is:
- How much money is necessary to pay off the balance of the mortgage on the home.
Immediate cash needs for liabilities
A comprehensive life insurance program may help to ensure that your family will not suffer unforeseen economic consequences when you perish. You want to know they are taken care of. So your policy should provide an adequate settlement fund to cover personal debts, emergency reserve fund, and other expenses. When estimating your liabilities, you need to know:
- Amount required to pay off personal debts
(credit cards, personal loans, tuition loans, car loans, etc.)
- Emergency reserve fund
(extraordinary medical expenses, a reserve for emergency and unexpected expenses, 5%-10% of annual income is suggested)
- Other expenses
(typically the greater of $15,000 or 4% of your estate* and includes income taxes, probate fees, lawyers’ commissions and fees, accounting fees, other administrative commissions and fees, funeral costs)
Parents know their children can pay a price for not having a sound education. According to the U. S. Census Bureau, adults with a bachelor’s degree earned an average of $57,616 in 2013, while those with a high school diploma earned $33,852. Using life insurance as a tool, you can provide for education funds, even in the event of your death.Rising costs have made it more important than ever to build an education fund. Over the past few years, public four-year college/university costs have increased an average of five percent annually.