Life Insurance on a Tight Budget

 

Slide3

 

If you have been reading my postings on my fan page or my my blog, you may have drawn a conclusion that you need to purchase life insurance.

The reason we purchase life insurance is to protect one’s income.  Generally, we need to decide how much money the family is going to need upon our death.  The first thing to do is to make a list of all debts that you have now.  Then compute the dollar amount of your salary times the number of years you would like to provide for the family.  Add a percentage each year for inflation, as the cost of living increases every year.

For example, John and Mary have $50,000 in credit card debt and an outstanding mortgage of $250,000.  John earns $50,000 per year and they decide to include 5% for inflation per year.  Mary would like an income for at least three years after John’s death.

Most families would elect to cover, at least, the mortgage with life insurance so that the family would not lose the home.  The spouse could elect to use the life insurance proceeds to pay off the mortgage upon death of the other spouse. 

Ideally, both spouses should purchase an amount of life insurance on themselves to cover the mortgage, since both make contributions from their salaries to pay the mortgage.  A life insurance agent can assist in helping the couple to determine the amount of cover they can purchase, based on their budget.

The most economical insurance policy would be term insurance which provides a death benefit without cash value.  The most advantageous policy would cover them for ten, twenty, or thirty years at a level death benefit.  The spouses would name each other as beneficiaries on each other’s policy.  In this way, each would collect the proceeds of the policy, if the other dies.

Younger couples would be able to purchase this amount of coverage very inexpensively.  However, older couples would have to pay more money, especially if they have health problems.  Therefore, they may have to elect lower levels of coverage.  However, a lower amount of insurance is better than none at all.  Couples should purchase as much insurance as their budgets will allow.

In conclusion, couples should make plans for their financial security for the family in the event of the untimely death of one or both of the spouses.

 

Advertisements

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s

%d bloggers like this: