Is your Life Insurance Adequate

You are greeted by a rather spindly man who has a great smile and precise diction. He introduces himself to you and ask you, “Are you properly insured?” You say “yes”. After all you and your wife both have the max offered at work. You don’t remember the amount but it has to be enough! So you think to yourself This must be another salesman, How can I get rid of him. A month later, your wife is killed in a car wreck, your 2 children ages 3 and 5, are without a mother. Her salary is completely gone! wiped out in one fail swoop! You didn’t think this far in advance. You now have extra child care costs, a house payment, car payment,etc and tending with funeral costs on top of that! Often it is assumed that a person’s life insurance is adequate your life insurance adequate?. This is a mistake that can cause financial ruin if not properly addressed. Normally what is offered through the companies insurance carriers are what I consider supplemental. What you carry outside the company should equal to 10-12 times your annual income. So a couple making 100K collectively, should at the minimum carry 1 million. To address this problem, find out the couples total income multiply it by 12. This will give you the base. Never turn down the supplemental insurance at work, especially if it is free. This could be used as a burial policy.

Once the amount is determined search for an insurance broker that is not a captive agent (one that sells only their products). Get a quote for 20 year level term. The reasoning behind this is you are buying an insurance policy not an investment. A term policy is just that, a period of years. This is very important, since the policy is like car insurance. You are insuring a person for a specific time with no cash value at the end of the period, so you MUST prepare for the future. And this is accomplished by investing the difference that you would normally use for a permanent policy and put it into something that will grow over time. So when 20 years comes and goes, instead of building a cash value that has cost you in fees and commissions thus reducing your return, you are using mutual funds to build a potentially larger cash value. I am not reccomending one type of policy over another but their are policies that fit cetain lifestyles and ages. For example, and older person might be in trouble if he purchases a term insurance policy and doesn’t save and invest the difference. He will now be older and could have possible health issues in which he could become insurable. So this person could be a good candidate for permenant insurance.

NOTE: This is a somewhat riskier scenario so you should always contact your financial adviser