You Invest in Life
purpose of life insurance is to provide a source of income, in
case of death, for your children, dependents, or other
Life insurance can also serve certain estate planning
purposes, which we won't go into here.
Buying life insurance is contingent upon whether anyone is
depending on your income after your death.
If you have a spouse, child, parent, or some other
individual who depends on your income, then you probably need
Because life insurance protects your family in the event of a
death, it is important to determine the correct amount. Most
people do not have the right amount of insurance.
There are two basic types of life insurance: term and
permanent. Term insurance is insurance that covers a specified
period. If you die within this time frame, your beneficiary
receives the insurance benefit. Term policy premiums usually
increase with age.
Permanent insurance such as universal life, variable life, and
whole life, contains a cash value account or an investment
element to the insurance.
Rules of Thumb
The younger your children, the more insurance you need. If
both spouses earn income, then both spouses should be insured,
with insurance amounts proportionate to salary amounts.
If the family cannot afford to insure both wage
earners, the primary wage earner should be insured
first, and the secondary wage earner should be
insured later on. A less expensive term policy might be
used to fill an insurance gap.
If one spouse does not work outside the home, insurance should
be purchased to cover the absence of the services being
provided by that spouse (child care, housekeeping,
bookkeeping, etc.). However, if funds are limited, insurance
on the non-wage earner should be secondary to insurance for
the wage earner.
If there are no dependents and your spouse could live
comfortably without your income, then you will still need life
insurance, but you will need less than someone who has
At a minimum, you will want to provide for burial
expenses and paying off your debts. Make a list of
your outstanding loan and credit card balances.
And mortgage balances if you do not have private
mortgage insurance on the loan.
If your spouse would undergo financial hardship without your
income, or if you do not have adequate savings, you may need
to purchase more insurance. The amount of insurance you need
depends on your salary level and that of your spouse, the
amount of savings you have, and the amount of debt you both
If you need help figuring out the correct amount of life
insurance you need, then give us a call at
925-634-2344. We're happy to help.
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