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07-12-2008 by Colleen King
Life Insurance is always an odd discussion to embark on, and I try to get that out right off when I speak with clients for the first time. Basically, when couples are shopping for life insurance for the first time, what you are trying to figure out how much money one would need if their spouse/partner were to die in order to maintain the current standard of living.
There’s a happy discussion! But realistically, when you have a family, what would happen if one of you were to die? These days, most couples are both working because if you live in California, you’ve had to either take out a mortgage the size of a small nation’s GDP. Or if you are renting, you know, rents here are pretty ridiculous too.
Optimally, when figuring out how much coverage you need, we look at your expenses on a monthly or annual basis to see what it would take if the income from one of the partners were to go away. This can be done in multiples of annual salary, or look at what it would take to pay off the mortgage, cover utilities, food, schooling for the kids and eventually college. As well as any other incurred debts. Either method usually gets you pretty close to the same number.
Then the type of insurance you need–term or permanent, either whole or universal. That will be covered in another post. Let’s say we’re looking at term rates, because that’s usually the less expensive. Doesn’t always mean cheap though–again, your health history, smoker status and a few other things get in to play. Please try to be of a normal weight, nonsmoker, not have a hazardous occupation and be pretty healthy. That way we can get the best rates. But if you’re not in ‘super hero’ status, don’t let that keep you from checking into rates.
If you need a $1,000,000, 20 year term policy let’s say, and the monthly premium is NOT going to fit into your budget, don’t do it. We start ratcheting back the amount until the cost isn’t a strain. Even if the final amount won’t cover everything that you want it to, you need to have some coverage rather than none. That will buy your surviving spouse time to grieve and deal with life without facing losing the home. It gives them time to figure out what they are going to do, and not having to make huge financial decisions at a time when they can’t think straight.
So, even though you aren’t going to die, talk to a good agent about your needs and look into the cost of something that will provide financial peace of mind. Life insurance–a morbid, but crucial discussion. Don’t make a bad situation worse. Be well!