Life Insurance

When thinking about a life insurance policy, it is important to consider your human life value. Your human life value is your economic worth over the course of your lifetime. This is important as this is the amount of income you are projected to earn that you and your family count on.

Sometimes you hear about human life value in the case of a wrongful death lawsuit. Someone is killed prematurely, and their human life value is calculated to determine the economic loss to their survivors. If you were to calculate your human life value, the number may astonish you.

The most common way to determine your life insurance needs is by conducting what’s called a Capital Needs Analysis. Here’s how it works:

1. Evaluate your family’s needs: Gather all your personal financial information and estimate what each of your family members would need to meet current and future financial obligations.
2. Tally up resources: Assess all the resources that your surviving family members could draw upon to support themselves.
3. Calculate the difference: The difference between their needs and the resources in place to meet those needs is your need for additional life insurance.

This may look simple enough, but calculating one’s life insurance needs can actually get pretty complicated. Find out how much you need using our Life Insurance Calculator or contact Set for Life Insurance.

If we have one piece of advice after more than 30 years in insurance, it’s to get life insurance while you are young and single. If you’re young, healthy and have a good family health history, your insurability is at its peak and you’ll be rewarded with the best rates on life insurance. If you anticipate a need for life insurance down the road (e.g., you’re the marrying type) and you can fit the premiums into your budget, it might make sense to lock in coverage while you’re young and single. Doing so can eliminate the worry of having to qualify for coverage when you’re older and maybe not as healthy as you once were.

Furthermore, you may have people that depend on you financially. For instance, some single people provide financial support for aging parents or siblings. Others may be carrying significant debt that they wouldn’t want to pass on to family members who survive them.

In short, any time you have a major life event, you should consider your level of life insurance. If you have someone who is dependent on your income, you may be a candidate for life insurance. Additionally, there are several life events that may trigger a life insurance need:

• Getting Married: When you’re married, you share everything with your significant other, including your financial obligations. Many people mistakenly believe that they don’t need to think about life insurance until they have children. Not true. What it one of you were to die tomorrow? Would the surviving spouse be able to pay off credit-card balances and car loans, or cover the monthly rent and utility bills? If you’re planning to have children, you’ll want to buy life insurance right away and not wait until someone is pregnant. Some companies won’t issue a policy to a woman during her pregnancy. Since health complications sometimes arise, they’ll want to wait until after the baby is born to issue the policy. Buying insurance before a baby is on the way helps avoid this potential problem.
• Having a Child: Most families depend on two incomes to make ends meet. If you died suddenly, could your family maintain their standard of living on your spouse’s income alone? Probably not. Life insurance makes sure that your plans for the future don’t die when you do.
• Divorcing or Becoming a Single Parent: As a single parent, you’re the caregiver, breadwinner, cook, chauffeur, and so much more. Yet nearly four in ten single parents have no life insurance whatsoever, and many with coverage say they need more than they have. With so much responsibility resting on your shoulders, you need to make doubly sure that you have enough life insurance to safeguard your children’s financial future.
• Buying a Home: When you buy a home, you take on a mortgage obligation that must be paid back, even at death.
• Opening a Small Business: Besides taking care of your family, life insurance can also protect you as a small business owner and your business. What would happen to your business if you, one of your fellow owners, or perhaps a key employee, died tomorrow? Learn more about business options such as key person insurance.
• Changing Jobs: If you have changed jobs, you may have lost some of your life insurance benefits. It is important to reassess your needs to ensure you are adequately covered.
• Grown Children: Just because the kids are through college and the mortgage is paid off doesn’t necessarily mean that Social Security and your savings will take care of whatever lies ahead. If you died today, your spouse will still be faced with daily living expenses. Would your financial plan, without life insurance, enable your spouse to maintain the lifestyle you worked so hard to achieve?
• Retirement: Depending on the size of your estate, your heirs could be hit with a large estate tax payment after you die (45% of your estate)? The proceeds of a life insurance policy are payable immediately, allowing heirs to take care of estate taxes, funeral costs, and other debts without having to hastily liquidate other assets. And life insurance proceeds are generally income tax free and can be arranged to avoid probate. Finally, if your insurance program is properly structured, the proceeds from your life insurance policy won’t add to your estate tax liability.