You are not a dumb person.
You know that life insurance is important, and that’s why you have coverage through your job, right? In the event tragedy strikes, you want to ensure that your loved ones are covered, and life insurance is a viable way to do this.
But just how covered will they be when you’re gone?
The truth is your policy is only as good as your coverage, and the last thing you want is to surprise your family with unexpected debt and no payment solution in sight after you’ve passed.
So right about now you’re probably thinking, “How do I know if I have enough coverage?”
By asking yourself the tough questions, that’s how. Let’s look at four questions you’ll need to ask to find your answer.
1) Calculate all of your expenses: Chances are, when you receive your weekly or bi-weekly paycheck, a large chunk of it goes toward bills like your mortgage/rent, food, child care, student loan payments, savings, car payments, utilities, etc. But are you also accounting for discretionary costs like vacation and entertainment (eating out, movies, Netflix) etc.? These other costs add up quickly, and you should assume that if you unexpectedly passed away, your family would continue to live a similar lifestyle as they did when you were alive. Sit down and go through your expenses with a fine-tooth comb to figure out where every dollar and cent that doesn’t go into your bank account (or toward a bill) actually goes.
2) Forecast college costs: Despite many universities being not-for-profit, college is big business—and that’s not going to stop anytime soon. Today’s tuition can quickly become tomorrow’s memory, which means you to need be a bit psychic when it comes to predicting college costs. According to Bloomberg, private college tuition and fees rose 3.7 percent to $31,231 annually; four-year public school rose 2.9 percent to $9,139 annually (for in-state residents). College costs have been rising at about a rate of 8% for decades—this is a good rule of thumb to use when calculating the cost of your child’s education in the future.
3) Plan out your funeral, today: Yes, we know this sounds super creepy, but the upside is that if you do it right the first time, you’ll never have to think about it again. Securing life insurance now ensures your relatives won’t pay through the nose when it comes time to honor your final wishes. Whether you want a New Orleans-style sendoff or a traditional burial, you’ll be able to square away the price tag ahead of time.
4) How comfortable does your spouse want to be? Will your spouse be working after you pass or will he/she need to replace your income to survive? Even if he/she continues to work, can they make it on just his/her paycheck alone? Life insurance is a great way to supplement income that your spouse may receive before those income sources inevitably stop. Save your spouse the stress of having to prematurely spend down assets to produce income just to stay afloat and possibly putting their financial future at risk.
Taking time out of your busy schedule to pinpoint how much coverage your family really needs is the difference between providing your family with the lifeline they need versus giving them just enough to stay afloat after you’re gone.
Help your family thrive in the future. Just a few minutes of time today can get you up to six quotes for life insurance!