It is very possible that you may need life insurance even after all your children are gone from the house.There are many different reasons why you made need life insurance once your children leave home. Your children might be in college or not be fully independent financially, life insurance may aid you in this scenario. You might already have enough saved up for tuition, your children’s living expenses still continue though, social security benefits for surviving children and spouse will not continue though.. they are stopped once the children are out of high school.
There might also be other dependents that you need to support. Parents, disabled older children and others that are dependent on you financially would be helped out if you had life insurance if you died before them. You may want to offest a survivor’s reduced social security benefits. If the dependent dies early, this means they did not receive any promotions or salary increases which may have increased the Social Security benefits. A life insurance policy will often help ease this concern.
Being financially devoted to mortgages, leases and car loans is an affliction that two incomes have. Life insurance on each earning spouse will help the requirements on joint mortgages stay afloat. It is wise to obtain life insurance even if you do not have dual operating financial dedications, as it will offset any losses that may occur.
In good practive, each family should have a reserve of money for rainy days. This emergency fund should be around two thirds to one half of the total yearly take home income. If this reserve of money doesn’t exist, the family who loses the family member will be very financially exposed and sensitive without a decent fund or life insurance plan to compensate for these after death expenses and taxes.
Your children (and many young adults) usually do not have any plans for their funeral costs or other after death medical bills and estate alteration costs. State income and property taxes will be a burden that they will not think about in the short term. Thus life insurance provided by you will cover these obscene costs which can vary greatly but are most often very expensive.
Good life insurance will help prevent the reduction of income if one spouse is deceased after receiving Social Security retirement benefits. Both people in a couple receives the benefits, however the one who earns more gets one based directly on his or her income, while the one who earns less before retirement gets half or much less than the larger earning spouse. If a spouse dies and it happens to be the spouse who earned more before receiving retirement benefits, having good life insurance will help the single spouse recover from this loss of income.
You can even signify some of your life insurance premiums can be given to heirs or your favorite charities. This is commonly well thought of if your assets would have been liquidated without this option set forth.
Mike Bell
http://www.articlesbase.com/finance-articles/do-left-alone-parents-need-life-insurance-133003.html
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How much life insurance should we have on each other at our age?
My husband is 27 turning 28, I am 24 turning 25. We own a home owe roughly 98,000 on it still, have two children. No credit card debt at all. (don’t have any cards) Our cars are 2,000 away from being paid off so I don’t think that should be figured in at all.
I have 100,000 on my husband and 150,000 on me. I took more on me because he has no family here and though my family of course will help him if I passed away but I thought because I stay at home and he would have to find daycare and all he would need more.
My sister said I should take out at least 2x my pay off on my house so that I could pay it off and still have 100,000 to cover financial issues until the parent left could settle in to taking care of a house hold alone.
Do you agree? Should we increase our policies? I just don’t know…it is hard to think of these things but I want to make sure that if one of us pass away my family will be taken care of and not have to worry about money.
Your husband’s policy is reasonably sufficient, but yours is not. Increase yours to the same level as your husband’s. Buy only term life insurance, since it’s the least expensive protection available. Shop around as well, since premiums vary considerably.
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I would say folks your age tend to carry more than what you have. It would not be unreasonable to carry around 250-500k of term on each of. The house would be one factor, but your children are the other. Having enough in life insurance benefits to take care of them and their education would be prudent as well.
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You do want to shop around for term quotes in order to maximize your premium.
http://www.ohioinsureplan.com/index.php/insurance/life-insurance/
You didn’t mention anything about how much money you each make or what your expenses are. Usually people will take out enough life insurance to cover debt, college costs and income replacement. From a debt standpoint you’re saying about $100,000. As far as putting two kids through college, I’m guessing they’re young so you might be looking at anywhere from $50,000 – $200,000 per kid. Then the income replacement should replace at bare minimum 3-5 years income so that if something does happen you have the resources to make up for the lost income. That is just an easy to follow guide. Please let me know if you have any questions.
PS- How much insurance do you have on your house? Probably as much as they will give you, so that if it burns down you can rebuild a house that is just as good. No insurance company will give you more coverage than your house is worth right? So what about your life? Look into what Human Life Value is? Google it.
References :
http://www.evolutionofwealth.com
The amount of life insurance coverage as well as the type of coverage (term vs permanent) is a tough question to answer without much more information – lifestyles, income, future debts and future expenses etc.
Off hand, I’d say you both need more like $400,000 of total coverage. It looks like you have two young children. If you want to send them both to college, you are looking at around $400,000 for four years of college for both (by the time they are 18 to 22).
What if death is not sudden and one of you develops an illness that requires quitting work. Your income goes down and your expenses go up. When that person dies, adequate life insurance will replace the lost savings and lost income.
You mention a sister. If she has children and names you as guardian if she dies before they are 18, how much money do you think it will take to raise them and send them to college?
Do you plan on staying in the same house for the next 50 years or move up to a better home (and a higher mortgage)?
You should really meet with a professional – a financial planner or insurance agent – and map out a strategy for your financial life. You will also need to meet with a lawyer to discuss custodian issues for the children and who will serve as trustee over the life insurance payout. You may not want the same person to serve as both.
Good Luck.
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Ok, I am going to blow you away here because my answer is so much higher than the other posters.
The person who said to examine debt removal, college funding, and income replacement was right. The methodology that followed is very different than what I use, though.
Future college cost estimators can be found all over the internet. Look for one at The College Board, the company that produces the SAT and many guides to college. Total the estimates for your children and write that down for college funding.
Tally up every bit of debt you have, from mortgages to cars to credit cards, though in your case some are non-issues. I recommend counting cars as the amount you finance when you buy new. Why? Because your car will wear out. If one of you dies just after replacing a vehicle, that $1,000 estimate won’t cut the mustard. Remember to include funeral costs. This is your "Cash needs/debt elimination total." Write it down too.
Income replacement is where I differ from most. Many folks say to give 3-5 years to replace lost income. I think that’s a losing strategy. If you and your spouse each make $50,000 a year, what do you think the odds are that in 3-5 years you’ll be earning $100,000 a year to make up the different? It’s very unlikely.
Here’s how I do it:
I assume your family will want the deceased spouse’s income to continue as if he or she were alive. To do that you need a block of cash sufficient to produce that income on an ongoing basis. I recommend planning around investing with a target return of 5% to minimize market risk.
For example, if the deceased’s income was $5 a year, you’d need $100 in a 5% vehicle to produce it on an ongoing basis. In other words, you need a block of cash 20x the income to be replaced. That’s MUCH larger than most people estimate, but the math holds.
It also is part of why the 9-11 survivors fund paid out an average of 30x the deceased’s salary – 20x to cover income, 10x to cover everything else.
it makes for a high total, but by using a good term policy the cost can be reasonable.
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I’m a licensed insurance agent.
Buy term, buy term, buy term, whatever you do, buy term (ie don’t let that Farmers agent talk you into a VUL!). At your age, the difference between 150K and 750K can be minimal. Buy as much as you are allowed to buy. Look at a 10yr term, but also get the quotes for 20 and 30yr terms. You’re buying a product designed to be there for your family if the worst thing possible happens, so it only makes sense to have enough to actually make a difference. Your family can never replace you or your husband, but wouldn’t it be nice to take financial worries out of the equation forever? That’s what I call taking care of your family when you’re theoretically unable to do so anymore! On the flip side, it only takes a single "diagnosis" to preempt you from ever being able to obtain life insurance ever again, so buy what you need NOW. I’ve got clients under the age of 30 who cannot qualify for any life insurance due to various diagnosis (cancer, MS, heart conditions, etc), and they beg me to find them a carrier who will quote them! If you qualify well, I would recommend a min 750K 10yr term on each of you. Just my opinion, but it sure helps me sleep better at night…
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