It seems like every day another one of our Facebook friends is sharing a picture of an ultrasound, hosting a gender reveal party, or showing off pictures of their newborn baby. It is an exciting time in life, when a new human comes into the world! The love that new parents feel towards this tiny person is unmeasurable, and with that love comes the natural need to protect. How will you ensure that your child has everything they need to thrive in this crazy world? It’s one thing to make sure they are cared for while you are still here on earth to watch over them, but what happens when you are gone? Talking about death is tough, but it is necessary as a parent or guardian.
When it comes to life insurance there seems to be three reasons why people don’t have it or don’t have enough of it:
- They have some form of insurance through work and assume they are all set.
- They don’t want to think about the possibility of an untimely death and avoid the topic all together. Or,
- They assume they can’t afford it
It’s critical to recognize that while you are very lucky if your employer offers some form of life insurance as part of your benefits package, it does not mean that you have enough life insurance. In order to know how much you need only takes a small amount of effort. Here’s what you need to consider:
- What is your annual income?
- How much of that income goes towards your dependent?
- What other sources of income does that dependent have access to?
- How long with your dependent need income?
- What is the expected inflation rate over that time period?
- What kind of investment return is realistic once the insurance is paid?
- Is there any other insurance in force?
Here’s an example:
A single income family takes home $90,000 a year. 60% of that is spent on caring for the children. If something were to happen to that income, there is no other income in place. The children are 5 and 6 and will need to replace that income for roughly 15 years. With an expected inflation rate of 3.5% and a conservative expected return of 5%, that family needs a 15 year term policy of $720,000.
The cost of this kind of policy for a healthy 30 year old would be less than $30/month. That’s $30 per month to give you and your family the peace of mind of knowing that your children and partner are cared for in the event of your death.
You don’t need to know how to do these calculations. You simply need to be able to answer the questions above and contact your advisor (or us) to determine your life insurance needs. It only takes a few minutes to protect your family and is likely more affordable than you think. Take the time to find out if you have enough life insurance by contacting us today.
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