Life Insurance

It’s All About Your Family’s Need

When calculating the need for life insurance, the conventional, “inside the box” thinking typically takes into account the need to replace just one income…the income that is lost by the primary income earner who is no longer there to make the contribution. But like so many things in life, the most simplistic way of thinking about a problem is not always the most useful.

While a standard rule of thumb is to lock in a term policy for 8x or 10x your annual salary, the actual coverage amount that is right for your family depends entirely on your unique needs. If you want your life insurance policy to provide proper support for your family for an extended period of time, you’ll need the right coverage for your situation. If you’re comfortable with your insurance policy helping your loved ones for the short-term, you can get away with less.

Life Insurance is Difficult – For Everyone

Tragically, when the life of one parent in a young family is lost, a paycheck is only one part of what disappears into the enormous void that is suddenly created. The working partnership that existed between two parents role-playing is forever changed. The multifaceted roles that were performed by both spouses in running a family can hardly be filled by a single parent alone.

In so many cases today, the reality of the situation is that both spouse’s income earning potential is affected when one is lost. As a practical matter, when both parents work, many families will need to take into account two incomes when calculating life insurance need.

Let’s take one example:

The head of a household decides on an $800,000-$900,000 term life insurance policy, for several reasons. First, the coverage needs to replace a good portion of the breadwinner’s lost income. With the main income earner removed, the spouse would very likely need to continue to work, or potentially find a job.

There’s also the mortgage to consider. After the surviving spouse pays off the mortgage and puts money into a child’s savings account, how much will be left? How far will the income last if a widow or widower decides not to work for 6 months in order to provide their children with more stability?

When another quarter of a million dollars can cost as little as $22 dollars/month, the lifestyle implications are clear. Calculate the consequences of what will befall two incomes, not just one. In the final analysis, two incomes are what can be at stake.

What Is Enough? 

How much life insurance is enough life insurance for you and your family? Just give Village Insurance a call to help determine how much insurance you need, our calculators perform an instant life insurance needs analysis. Here’s some of the information we will need to help us work with you to determine the amount of insurance you need.

• Total annual needed by your spouse and children in the event of your death.
• Number of years you would like to provide this income to your spouse or children.
• Your gross income annually.
• Your date of birth.
• Your spouse’s gross income.

Would you like to pay off any outstanding debt? For example, mortgage, loans, credit cards, college. If so, enter the debt amount.

• Burial expenses. That can include funeral, probate, and any other legal matters.
• Total amount of your existing life insurance.
• Interest rate assumption. This assumes the interest death benefit proceeds are invested.

Life insurance is never easy but it is necessary. It’s purpose is to provide comfort and stability that leads to fostering successful and prosperous lives for a family that has lost their alpha or omega. Village understands and has experience helping those who don’t know where to begin, know a little, or even know a lot. You never know what to expect and you shouldn’t have to become an expert during these situations, allow Village to support you with life insurance.

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