Do you have people who depend on you for financial support? Your family, business partners, or employees perhaps? If so, how would they make ends meet if you were to pass away unexpectedly? Since few people have enough money saved for an event such as that, you may want to consider life insurance as a practical and affordable way of protecting those that depend on you from financial devastation. Life insurance can replace your income, cover your final expenses and can even create an inheritance for your heirs if you have limited assets.
How Much Life Insurance Do I Need?
Calculating the amount of life insurance your beneficiaries would need to carry on without you begins with determining your expected contribution to your dependents in the years to come. According to the Insurance Information Institute, a simple rule for buying coverage is selecting an amount that will replace your income, provide for unexpected bills (medical, repairs, etc.), pay for major future expenses (college, braces), and replace the services you provide to your family (cleaning, childcare, property maintenance, etc.). You should also take into account the cost of any benefits your family may eventually lose from your employer, such as health insurance coverage or retirement contributions to a 401k.
Considering Inflation
After taking into account the cost of dependent expenses, inflation can easily sneak in to take a bite out of your benefits. While term life insurance can be purchased with the same guaranteed benefits for up to 30 years in the future, inflation means the purchasing power of that benefit will not be the same in a decade as it is right now. According to InflationData.com, the average rate of inflation in the U.S. is between 3 and 4 percent per year. Your agent can help you find ways to hedge against inflation and cost of living increases, for which raises in your annual income would normally compensate for.
Considerations When Purchasing Life Insurance for Your Family
Life insurance can provide much more than income replacement – it can help you leave a legacy. Do you dream of one day being able to pay for your child’s college tuition? Would you love to pay off the balance of your home mortgage as a gift to your family should you pass away prematurely? Though you plan to work to provide these things for your loved ones, meeting lofty financial goals are not out of the question if the unexpected were to happen. In fact, many people find the cost of adding a quarter million dollars to their policies to be negligible in comparison to the potential benefits their families could one day receive.
Additionally, certain types of life insurance policies can provide living benefits in addition to a death benefit. These types of coverage – whole life and universal life – are often used both for peace of mind and long-term savings. As premiums are paid over time, they are not lost, but rather begin to accumulate cash value and interest. The advantage is having a life insurance policy that can benefit both the beneficiaries and the policy-holder.
Talk to Monty Homewood about Your Life Insurance Needs
All life insurance policies are not created equal, and your family’s unique financial needs will not be the same as someone else’s. There is no one-size-fits-all policy; instead, you need the assistance of a skilled life insurance agent who can help evaluate your long-term needs. Call Monty Homewood today to learn how your family can thrive financially no matter what the future holds.
