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Size Does Matter: Do You Have Enough Life Insurance To Really Protect Your Family?

by Scott G on May 5, 2013 · 0 comments

life insurance new fathers dads and mothers moms

Life Insurance for New Fathers (Dads) and Mothers (Moms) and Parents

Congratulations! If you are reading this article you are most likely and proud new mom or dad.  Having a newborn for the first time is an amazing feeling that is difficult to put into words.  Life is no longer about you; it’s now about your child. You experience new feelings of love and joy that you have never felt before, it is the proudest moment of your life thus far, and a new emotion of protectiveness fills you to your core.  The health and happiness of your child is now your number one priority in life and you will do everything you can to assure this.

Also, with the new baby comes a new financial responsibility that you haven’t experienced before.  This new life is depending on YOU to provide the necessities of life until they can provide for themselves.  What if there was a way to guarantee that if anything happened to you, your spouse and child would have all of their basic needs taken care of- and then some- until they would no longer would need financial assistance, even proving enough money for child’s higher education.  Even creating a legacy in your name.  Fortunately there is such a way, and the answer is though the miracle of life insurance.

What is life insurance?

To put it simply, life insurance protects those who count on you and your paycheck.  If you die prematurely, life insurance guarantees your dependents with a continuing stream income to replace yours- until they can live without it.  Life insurance also can provide immediate funds for funeral costs; final expense costs- average about $7,00 to $15,000, due immediately.

What type of life insurance to get?

There are many types of life insurance on the market.  Term life, whole life, universal life, and many other types are available.  For most people, especially new parents, the best choice is term life insurance.  Term life insurance is recommended by some the most well-known financial experts in America like; Suze Orman, Dave Ramsey and Clark Howard.  Term life provides the most about of protection at the lowest price.  The main purpose of life insurance is to protect your dependents until they no longer rely on your income to live.  This is exactly what term life insurance does.  It provides guaranteed protection up to 30 years, and the payment never increases during the term regardless of your health or age.

How much do I really need?

Unfortunately, most people who have life insurance do not get enough coverage.  They think $50k, $100k or more depending on your current lifestyle, is enough to replace their paycheck.  However, when you do the math, you realize you’re going to probably need a lot more life insurance than you first thought.   The number one statement I hear from people who received life insurance proceeds is that “it was essential but it wasn’t enough.”

Let’s explain why financial planners generally recommend at least 7 to 10 times you annual income in life insurance.

Example: A 35 year old male named Bill makes $50k a year from his job.  He has a new baby and now his wife is going to stay at home with the baby for a while until the child is a little older.   He thinks he has enough life insurance since he has a free $50k policy through work and another $100k he purchased on his own outside of work.  He has a total of $150k in life insurance but as you will see below, it is not even close to enough to really help his wife and son the way he wanted.

Bill’s Monthly Expenses:

Housing: $1,500                Utilities: $100                    Miscellaneous: $100

Food: $500                        Cable and TV: $100

Auto payment: $300          Cell Phone: $100

Gas: $250                          Auto Insurance: $100

Total: $3,050

Bill unexpectedly passes away and only had $50k in life insurance from his employer and $100k from a policy he purchased outside of work.  His burial is $20k, due immediately.  That brings the amount paid out to his wife Kelly at $130k.  With a total monthly expense of $3,050 to maintain the same standard of living that will cost $36,600 a yearIn just 3 and half years the life insurance money will be gone and Bill’s child will only be 3 years old.  Now, Kelly has to work full time at a job that doesn’t pay her the same amount of money that Bill was making.  Her income cannot support their old standard of living and now they have to move to less desirable neighborhood and get buy on just the necessities.  With the huge cost of daycare, Bills wife is barely getting by.  She is not spending enough quality time with her child and their son is not being raised the way they envisioned.  Also, both Bill and Kelly wanted their son to get to college but with their financial situation that doesn’t seem to be a possibly anymore.  How can this have easily been avoided?  If Bill purchased the right amount of life insurance his family could have been protected and had a different life, the one he had planned for.

As you can see, having the right amount of life insurance is critical.  If you don’t have enough coverage, you family will be in the same situation as if you didn’t have life insurance in just a few short years or sooner.

Formula to determine the right amount of coverage

When choosing the right amount of life insurance to protect your family, add up your monthly expenses and multiply that by twelve (12 months in a year.)  This number will be how much your family will need a year to maintain their current standard of living.  Then multiply that number by the number of years your dependents will need to be protected for.  One of the most common number or term is 20 years, by then the children are adults and in college.  At a minimum you probably need at least seven to ten times your annual income in life insurance.  If for example you make $50k a year, multiply that by seven which equals $350k or multiply it by ten which would be $500k in life insurance which is needed. 

Don’t be underinsured!

Term life insurance is very inexpensive right now.  You don’t to be underinsured.  For example: a $500k on a 30 year term policy is only $38 month with SBLI for a healthy 35-year old male.  This rate will not increase for the next 30 years, guaranteed.  That is a very small price to pay for the peace of mind knowing that your family will be protected if you were to unexpectedly pass away.  If you have any questions about how much coverage you need specifically for you, do not hesitate to call (888) 988-5394 and speak to a licensed agent for a free needs analysis.  

Get a free needs analysis and personalized quote.  Call (888) 988-5394

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