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Life Insurance Strategies: What would your family do without you?

The dog days of summer, what does that really mean? I always thought it meant that things moved a little slower, especially here in the heat of Arizona. You can picture a dog lounging around without a care but it actually refers to “the dog star, Sirius, and its position in the heavens. To the Greeks and Romans, the ‘dog days’ occurred around the day when Sirius appeared to rise just before the sun, in late July.”[i] Honestly, in today’s world, dogs may be the only ones lounging without a care.

What would happen if you weren’t there?

But of all the seasons, the summer holds out the most hope for relaxing, being with family and loved ones and sitting by the pool. So in this season, with the possibility of having time to let your mind wander and spend extra time with family, I’m going to bring up the dreaded subject of what would happen if you weren’t here?

Of course, everyone would miss you but how many people are depending on you? If you have loved ones that are counting on your financial support, one of the easiest ways to make sure that they are still taken care of, even when you’re not here, is life insurance.

How do you know if you need Life Insurance for your family’s benefit?

If you are single and financially sound, meaning that if something happened to you, you wouldn’t leave a debt burden for someone else, then the life insurance policy that you’re getting through work would probably be sufficient.

However, if family members depend on you financially then you need to spend some time thinking about what would happen to them if you weren’t here. If you are married and your spouse relies on at least some of your income to pay the bills or if you have children, you need to give the topic of life insurance some serious consideration.

If you live in one of the nine community property states[ii] which include Arizona and California, your assets and debts are divided equally, and your spouse would need to pay off your debt if you died.

Your children need you!

In my opinion, you always need life insurance if you have children.

Different types of Life Insurance

Now that you’ve determined that you need life insurance, what kind of life insurance should you buy? There are two types of insurance: term life insurance and permanent life insurance.

Term Life Insurance to support your family

Term insurance is what the name implies that you would buy insurance that would cover you for a specific time frame, usually 10 to 25 years. Term is usually a lot less expensive because it is covering you during your younger but crucial years.

Permanent Life Insurance to support your family

Permanent insurance, which includes universal life, variable life and whole life is designed to cover you throughout your entire life if you should die. Permanent insurance policies can create savings that can potentially grow and is usually referred to as having cash value. By building up a cash reserve in the policy it makes it possible for you to still own the policy when you are much older. Of course having coverage when you are older and the cash value account makes permanent insurance more expensive than term insurance.

Obviously having a policy that will pay when you are in let’s say your 80’s is going to be more expensive than a term policy that will pay out when you are in your 50’s. Like most things, each type of insurance serves a different purpose and this is where I can help determine what type of insurance and how much insurance would be beneficial for your situation because everyone’s circumstances are unique.

How much insurance do I need?

Figuring out how much insurance you need, depends on what you want the death benefit to pay for when you are gone. The goal would be to have enough income to replace the deceased person’s take home pay. We usually try to replace income for a certain time period and that’s how we arrive at a number but you may have certain debts or things you want to pay for like college education or your home mortgage.

Determine what works for you

Either way, we can work together to determine what makes the most sense for your situation. The most important point to remember is not to procrastinate on this important financial decision.

Please let me know how I can help you through this process. Do not hesitate to give me a call if you have questions.

Happy Summer!