How Much Life Insurance?

Posted by BeingPreparedAdmin on Jan 22, 2012 in Insurances | 0 comments

I am in a hospital room right now looking at my mother asleep. As I sit here and think about her my heart goes out to her. I am thinking about a lot of things, but life insurance is sticking out right now. Life insurance is something that we know we need to have, but we don’t want it to be used. I saw an acquaintance pass away a few years back. He was the breadwinner and had no life insurance policy. You can only imagine the situation his wife was left in with no life insurance and no income. You don’t want this to happen to you or any of your loved ones.

The first question that comes to my mind is how much life insurance should I have? For simple calculations I don’t look at inflation or interest gained. You should always talk to a certified professional when making these decisions. This is what I did before meeting with my financial planner and getting my life insurance policies.

I looked at life insurance for myself because I am the breadwinner. This is typical. I went beyond that and thought of having to raise my children without my wife if something happened to her. My only thought for the children was to have policies big enough to cover medical and funeral expenses. I have life insurance on everyone in the house. The amounts differ based upon each person.

I used the same formula for figuring out my life insurance policy versus my wife’s. The only difference was how many years would I need income for. I wanted a way longer time frame for my wife then myself. Here is a simple formula I used for calculating my life insurance:

Life Insurance Amount = Burial Expenses + Income (How Many Years x Yearly Needs) + Special Events – Current Liquid Investments

Burial Expenses. You may want to take into account not only funeral expenses but other medical expenses that need to be paid.

Income. You will need to replace your income. This is where mine differed from my wife’s. I can work from home if needs be with my current skills. I would want to make sure that I had enough to work part time while they are in school. I would want to be home with my children and raise them. For my wife, I wanted to make sure that she would never have to worry about that. I wanted her to focus on the children and doing what she wanted. You need to figure out how much income you will need per year and how many years you want that to last.

Special Events. This is an important one you can’t forget. You may have children you want to go to college. You may have a wedding or two you need to pay for. You may have camps and other important events you want your children to attend. You need to make sure that you think of these and have enough to cover those expenses. The cost will not dramatically increase by adding this additional amount to your policy.

Current Liquid Investments. These are items such as 401(k), IRAs and savings accounts.

The one last thing about life insurance is to let people know where your policy is. The last thing you want is to have someone trying to find where your policy is and worrying about being able to cover expenses. First, get your policy and make sure that it is enough. Second, let those who need to know where the policy is. This will eliminate a lot of heartache and worry.

Why Insurance?

Posted by BeingPreparedAdmin on Dec 15, 2011 in Insurances | 0 comments

People dislike paying for something that they do not use. This is the rationale that prevents some people from using insurance. The purpose is not that I hope that I have an accident happen so I can use my insurance. The purpose is to protect you and loved ones in the event of an accident. Managing the risk of those events that could destroy your finances is just as important as all the other prin...