Do you know how much life insurance your family would need should the unthinkable happen? Do you know how to figure out where you and your family stand financially? Are you spending more than you earn or putting money away every month? What are the consequences to your loved ones if you don’t have enough insurance protection?
Questions to Answer
These questions should jumpstart your thinking process. If they prompt you to look at your bank statements, investment portfolios and insurance policies, this is a step in the right direction.
Think about your answers to these questions:
º How much do you spend every month? Your bank statements should give the answer.
º How much debt do you currently hold? If it’s more than your house and car payments, you may be spending beyond your means. If so, you need to buy additional life insurance.
º How much are you putting–and keeping–in savings each month? If you’re doing this consistently, you are living within your budget.
º What long-term saving goals do you have? Do you know how much money you need to retire so you’ll be able to pay for regular bills, future car purchases, your children’s education and your retirement? Do you have savings funds set up for one-time expenditures (not emergencies)?
º Do you know how much your surviving family members will need monthly should you pass away? The answers to the above questions should give the answer to this question.
Know your Numbers – Income and Spending
If you know that you spend X amount of dollars every month for bills and taxes, retirement, college funds and future car purchases. You also know how much you earn every month and how much your spouse earns monthly.
You’ve figured out that your investment income and Social Security benefits will take the place of the income you earned while you were working
Figure out how much you need to invest so you can replace your annual income. Depending on the percentage your retirement can earn, divide your annual income by that percentage. Take inflation into account as well, because this causes your cost of living to increase.
Effects of too Little Insurance on Survivors
Families who have too little insurance are going to suffer financially. Once the primary earner passes away, the family can see monthly income drop by at least 20 percent, although the number can be closer to 40 percent. This means that these families can’t cover mortgage or rent payments, car payments, utilities, vehicle insurance or monthly food bills.