Who needs life insurance? Maybe you!

Recently, I had a planning call with a woman who is expecting her first child. Having been through this particular life event myself, I started mentally going through the list of things I had to do when my husband and I were in the same position. High on the list was increasing our life insurance coverage. Why? In the unlikely event that I wasn’t around to provide for my child, I wanted to make sure the big expenses like our mortgage and her education were covered.

I’ll tell you the story of what happened when my dad nearly died of a freak staph infection at age 42. His life hung in the balance for three difficult weeks before thankfully he turned the corner. Thirty years later, my mom will still tell you how grateful she was that my dad had adequate life insurance, because that allowed her to focus exclusively on him without worrying about how she would financially take care of their four daughters without him. I’m so thankful that my dad made it through, and knowing this history made me realize that simply having proper life insurance coverage can be a gift to your loved ones during difficult times.

Term life insurance can be surprisingly affordable, especially if you are young and in good health. For example, a young healthy person might expect to pay roughly $62 to $71 per month for $1 million of 20-year term coverage.¹ The term selected may coincide with a milestone such as a child graduating from college, the mortgage being paid off, or a desired retirement age.

There are many considerations when choosing how much coverage to carry. Depending on your specific situation, it may make sense to carry enough insurance to replace a certain number of years of your income. In the case of my client who intended to work for approximately 20 more years, we targeted 20 times her take home pay as a starting point for the appropriate coverage amount. From there we backed out her current savings. The assumption here is that income that isn’t spent doesn’t need to be replaced. Also, savings implies an accumulation of assets that can help meet future obligations.

Risk management is an important part of financial planning. While we don’t sell insurance at West Financial, we can help evaluate your current coverage and potential needs. If coverage gaps exist, we can put you in touch with trusted insurance experts to help you fill the need. Please reach out to one of our relationship managers if you would like to talk about insurance needs specific to your situation.

Sources:

¹Monthly rates reflect the average price of $1 million in 20-year term coverage for a nonsmoker with health rating of good. Actual prices may vary based on health class. https://www.ramseysolutions.com/insurance/term-life-rate-chart

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