What Is Life Insurance – Part 1: Personal Uses of Term Life Insurance

What is life insurance?

Term Life Insurance is an income replacement and disaster management tool. If your family depends on your income, then you need to manage the risk of losing that income. One strategy for managing the risk is ignore it, whistle a happy tune and look the other way. Alternatively, you can try to get a handle on the economic costs of dying and pay someone else to carry the financial risk for you. That’s where term life insurance comes in. So what are the costs of dying? There are five primary financial burdens your family will face in your absence. Life insurance can be used to cover those costs.

Income Replacement:

If you have family members who count on you to cover the costs of daily living, then you need to consider what would happen to them if your income suddenly disappeared. How would they pay for food, clothing, utilities, transportation, little league and piano lessons. Take your monthly budget, multiply by at least 120 months and you have the first piece of your insurance need. For Example, if your monthly budget is $2500 per month, then you will need $300,000 to cover those costs for 10 years. What is Life Insurance? Life insurance can pay the bills when you are not here to pay them yourself.

Mortgages and Other Debts:

If you carry a mortgage or other significant debts, then your passing could put your family in a real financial bind. It could even put them out in the street. Your life insurance coverage should ideally be enough to leave your family free of major debts. Pay off the mortgage or reduce it to a level that your spouse’s income can support aloneWhat is Life Insurance? Life insurance can pay off your debts and free your family from significant risks and worry

Education Expenses:

In today’s high tech, highly charged information driven world, a college education becomes ever more important for your children. It is the ticket to a professional career. If you die young, how will your family cover the costs? Will your children have to give up their dreams? What is Life Insurance? Life insurance is a guarantee that your children can have the education, and advantages you want for them

Home Care Expenses:

Even in families where one spouse carries appropriate life insurance coverage, we often find that the other spouse carries little or no coverage. Especially in cases where one parent manages child care, home care and maintenance, shopping, laundry etc. (you can guess which spouse?) the “stay at home” parent is often uninsured. Ask yourself the question: Should my wife be insured as well? Figure out the cost for child care, housekeeping and other household help. Multiply it out until your youngest child is 18 and you have a significant cost that needs to covered. What is Life Insurance? Life Insurance is a guarantee that you can keep on working.

Ongoing Support:

There is a standard rule of thumb when we determine how many years a family should carry Term Life Insurance Coverage. How many years until your youngest is 25 and needs to be up and out of the house. Unfortunately, in many families the need for support might run way beyond the day when your last child is grown. If you have a special needs child, or find yourself supporting a sibling or parent, then you need to consider the costs of funding their care in your absense. For special needs children who are likely to need care far beyond your lifespan, this is a need that often calls for permanent coverage supplemented by term coverage. Ask us and we’ll help you determine the proper coverage amount. What is Life Insurance? Life Insurance is an opportunity to keep a lifetime worth of promises.


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