How much should I budget for Life Insurance?
A family should set aside a part of their income for life insurance. Typically, about 2-3% of their annual income should go towards the main-breadwinner’s coverage.
The following budgets are only suggested as a starting point and do not take into account all factors:
- If you make $25k, you would budget about $40/month.
- If you make $50k, you would budget about $100/month.
- If you make $75k, you would budget about $155/month.
- If you make $100k, you would budget about $205/month.
- If you make $125k, you would budget about $310/month.
Should I cover my spouse/partner if they are not the main bread winner?
Covering 6-18 months worth of mortgage or rent payments is wise. This gives the family time to mourn. They can decide what to do with their deceased loved one’s belongings during this period. They can also delay serious life choices, such as moving, until they are in a better state of mind.
Additional considerations should be taken if the spouse/partner cares for children or is a caregiver, as hiring a nanny, nurse or daycare could become a sudden financial burden.
If there is someone you share housing costs with, and you are partially or wholly dependent on one another’s income to make ends meet, you have sufficient reason to want to insure them.
For example, let’s say Mr. and Mrs. Bono share a nice apartment. They are both recently retired and each receives Social Security income, albeit one more than the other. Mr. Bono was a delivery driver and Mrs. Bono was a bookkeeper. If Mr. Bono dies, Mrs. Bono will have to decide which SS income she wishes to keep. The administration will not allow her to continue receiving both. Obviously she will choose the higher of the two incomes, but that income by itself may not be nearly enough to stay in her nice apartment. How many months, or let alone, weeks, can Mrs. Bono stay in her apartment before she has to move in with her daughter-in-law? She may only have the current month and the last month’s deposit, which would be 5-8 weeks.
By insuring both their lives, either one can “buy time” to make serious life choices if the other were to pass away.
Can’t I just open a savings account instead?
Unfortunately, no one can read the future. We can be here today, gone tomorrow. (Ask me how I know). A good life or mortgage protection policy can provide financial security for your family. This ensures they have the necessary funds to maintain an acceptable quality of life, something crucial if you were to pass away suddenly due to an accident or illness.
Additionally, some forms of life insurance policies build cash value, and some have living-benefit or return-of-premium riders. A life insurance policy provides your family with a level benefit or face value in case of death. A savings account cannot offer a payout that has not been previously deposited.
Don’t I already have mortgage protection through my bank?
Since the 2007 financial crisis, banks were banned from offering mortgage protection, since this presented a conflict of interest and far too many people lost their homes. If you want life or mortgage protection insurance, you have to go through an insurance agent.
I am relatively young and quite healthy. No one depends on my income other than me. Why should I buy life insurance?
The younger you start, the better your rates! As we get older and develop new conditions, we become a greater risk to carriers. The policies at our disposal become reduced. But if you already have a policy, you can often add coverage to it without additional medical approval, provided it hasn’t lapsed.
When life changes happen, such as marriage or having children, you will already have a great rate. This rate can translate to great rates for other members in your household.
Certain types of life insurance policies build interest. Some can also be used as a line of lending. This provides a nice nest egg for your future self!
My brother-in-law is undocumented and I worry that if he were to pass away, I’d have to provide for his children and my sister. Can he qualify for life insurance?
Certainly! There are fewer carriers who will insure undocumented immigrants. If the client has proof that they have been residing in the U.S.A. for over two years, I will do my best to help them find the right policy to protect their family!
I am married but my aging parents also depend on my income. Can I put them as beneficiaries?
In California, a spouse receiving less than 50% of a death benefit might need to sign off on additional beneficiaries. If your spouse is receiving at least 50% of the benefit, then you can freely assign the remaining 50%. You can choose anyone you wish for this.
I am getting too old. What is the upper age limit to buy a policy?
For new enrollees, there are a couple policies that cap out at 85. Other carriers/policies cap out before then. If you bought a Whole Life policy then you would be covered until age 100, even if you finished paying off the policy earlier.
If you are in your golden years, doing well, and you bought term life, you might want to consider purchasing Whole Life coverage in case you outlive your term insurance.
If you are over 85 and without life insurance, please keep in mind that you have the option to buy a policy to cover the younger beneficiary you had planned to include. This will set them up for financial success later in life.
I don’t have much money left over at the end of the month. What type of policy should I buy?
There is one type of policy every person should have regardless of whether or not they have dependents. This is Final Expense Insurance and coverage can be as low as $2,500 depending on the applicant’s age and circumstances. The term lasts one’s whole life or until age 100, so the policyholder proactively alleviates part of the financial burden of their funeral costs.
As a fellow agent says, “Statistically, we are all going to die.”
Does life insurance cover suicide?
Almost every policy has a default two-year exclusion on death by suicide. If the person covered died by suicide before then, the insurer would return the premiums as if the decedent had never had a policy. Someone who has a medical record of suicide attempts might only qualify for a policy that rules it out indefinitely.
If you are personally considering ending your life, please contact a mental health professional as soon as possible. You can find one at the following:
- dial 211 for community resources
- dial 988 for 24/7 confidential, free counseling
- visit Opencounseling.com for affordable therapy options
Or you can always message me, and I will do my best to connect you to the support you need as your fellow neighbor.
Additional questions? Send me a message!