Life Insurance on a Tight Budget

September 20, 2013

 

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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.

 


When to Consider Buying Life Insurance

February 8, 2013

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There are life events which should encourage families to consider buying life insurance. Unfortunately, life insurance is not a priority in the lives of many young families, as younger people tend to believe that they have many years ahead of them. However, the prudent thing to do would be to purchase life insurance to cover a loss of income in the event that something happens to one or both of the parents or if they become disabled.

They can purchase enough life insurance to cover college costs as well for the children. In the case of younger parents, life insurance is very inexpensive in the earlier years and parents would be able to afford to buy higher amounts of insurance coverage.

Newly weds should consider buying life insurance on themselves to protect their incomes in the event that something happens to them. If husband and wife are working, both can purchase life insurance on themselves. In this way, both can continue their normal lifestyles in the event of death or disability of the spouse.

When couples purchase a home, one thing that needs to be done is to purchase mortgage insurance to cover the mortgage in the event of death or disability of one of the partners. Many people suffered a loss of their properties during the economic crisis because they were not adequately insured. Some people may not be able to purchase enough to cover the entire mortgage, but any amount which they can afford would help their family.

When families experience financial hardship, the insurance is usually the first thing to go. Now, with the changes that insurance companies have enacted, families can continue their life insurance coverage in the event that the policyholder is disabled, unemployed, or when the family suffers a natural disaster.

In conclusion, families need to consider purchasing or increasing life insurance when they marry, purchase a home, or begin to have children, if they care about making sure they are protected in the event of death or disability. If you would like a review of your situation, feel free to contact me.

 


Robbing Peter to Pay Paul

October 9, 2012

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In this day and age, household expenses have increased because of the necessities which we now have to stay current with our friends and families. Technology has changed the way that we communicate with the world. Besides groceries, clothing, and mortgages or rents, we now pay for mobile phones, computers, iPads, digital television, and WiFi. Unfortunately, if we do not have these items, we lose track of what is going on in the world.

Because our household expenses have increased, we now have to be wise about how we are spending the rest of our money. Deciding what is important and what is not has become a challenge. For example, protecting the family against calamity in the event of loss is something we must do in order to have peace of mind. When young families start accumulating property and saving for college funds for the children, they must give careful consideration to protecting their investments. Most families will find ways of cutting expenses by reducing their costs of other items.

Therefore, a wise decision would be to purchase a life insurance policy to cover the mortgage and incomes that would be lost if something were to happen to the parents. In this way, the family can continue their normal lifestyle. They could remain in the house, continue paying the mortgage and the children could attend college without having to take out loans. The average cost of tuition alone is $6500 per year. This does not include room and board

One of the features built into life insurance plans to make payment of premiums easier is the grace period. When policy owners find themselves strapped for cash to pay the premiums, the grace period would extend the time in which to make the payments and still hold onto the policy. The policyholder would have thirty days to make the payments. This prevents the policy from lapsing and gives the policyholder time to make the payments. None of the benefits are lost because of late payments. The policy stays in force, giving the policyholder peace of mind.

In conclusion, parents must decide how they are spending their money on the necessities of life while still making wise decisions to protect the family against loss.