HOW
      MUCH LIFE INSURANCE?

      
 

      
"How much life
      insurance do I need?" That's a good question.

      
A quick answer is the
      greater of seven times your annual salary with a minimum of at
      least $500,000 per child.

      
A more in-depth answer
      depends upon what you need to accomplish and where a life insurance
      policy may actually be the easiest and/or best way of proceeding
      for you and your loved ones.

      
It's not simply a question
      of "What's the purpose of life insurance? But rather, "To
      what purpose do you intend to put the policy?"

      
The purpose of all insurance
      is to manage, minimize or eliminate the financial impact of an
      ascertainable risk. With life insurance, we know death will come,
      but just not when death will occur.

      
The "risk"
      that a life insurance policy attempts to manage, minimize or
      eliminate is that the death of the insured will come before the
      insured has been able to satisfy certain financial needs. Sometimes,
      these financial needs can never be satisfactorily handled without
      obtaining life insurance.

      
THREE MAJOR LIFE
      INSURANCE NEEDS

      
Generally there are
      three categories of life insurance needs or risks:

      
Human life value. In
      this case the calculation for the needed amount of insurance
      is measured by replacing the income you would have earned had
      you lived a long life. This income would have been used to pay
      off a mortgage, support minors or pay for college, etc.

      
Death time expenses.
      Death time expenses arise immediately as a result of your dying.
      For example, whether you die today or twenty-five years from
      today, your death will generate certain expenses, i.e., a bill
      for a funeral, a bill for state and federal death taxes, etc.

      
Liquidity or estate
      division. In certain family and business situations, the insured
      has beneficiaries (typically children) he or she wants to benefit
      equally. However the estate left behind is not liquid or the
      estate assets are not appropriate to divide. This need not be
      a sophisticated estate, but one as simple as leaving a house
      in Los Angeles and having two surviving children, one living
      in Los Angeles and the other living in Paris, France.

      
Or perhaps one child
      works in the family business and now runs it and the other isn't
      involved at all. It's better to have the child in the business
      receive the parent's interest in the business and the "outside
      child" receive an equal value in life insurance proceeds.

      
Do you have a mortgage,
      a business, a projected death tax, a business buy-sell agreement,
      a child headed to college and/or nursery school?

      
All of a sudden you
      can anticipate the figures involved and quickly realize how a
      life insurance policy can be useful in your particular circumstances.
      You also have an idea of the amount of life insurance you need!

      
DON'T PROCRASTINATE!

      
Unfortunately, many
      times the proper amount of life insurance is determined by the
      survivors only after death has occurred.

      
For instance, imagine
      a 30 year old professional earning $100,000 per year with a non-working
      spouse and three children, ages 1, 3 and 5. If the employed spouse
      died, would $700,000, (Seven times income), provide for the surviving
      spouse and the children until they are adults and also pay for
      a college education? Probably not.

      
Would it have been worth
      an extra $15 per month to increase the life insurance coverage
      by another $500,000? Probably yes!

      
 

      
HOW MUCH WILL A POLICY
      COST?

      
Life insurance costs
      are based upon average life expectancy factors. These mortality
      tables are provided by the government and the same numbers are
      used by every company. If your health or habits or hobbies will
      impact your life expectancy, then the cost of life insurance
      will be more expensive or maybe not even available.

      
For instance, do you
      work in an office or are you a test pilot? Do you race motorcycles
      in your spare time or do you smoke cigarettes and drive while
      intoxicated?

      
It's a fact of life
      that health rarely improves with age. So we always advise clients
      to purchase as much life insurance coverage as they can reasonably
      expect to need while they are young and in good health and without
      many "negative" habits or hobbies.

      
The only way to find
      out what a life insurance policy will really cost is to fill
      out an application and take the brief company paid exams. It
      can all be done is less than an hour! Within two weeks or so,
      the insurance company will make a formal offer of coverage to
      you and tell you exactly how much it will cost to purchase the
      life insurance policy you need.

      
Remember, the purpose
      of the policy is to manage or eliminate the financial risks which
      may arise as a result of your death. Whatever the premiums are,
      when life insurance is needed, obtaining the proper amount of
      life insurance is priceless to your loved ones.

      
KVA

      
© 2009
      HARLOW INSURANCE