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Financial Foundations: Your Life Insured for a Future Secured

November 28, 2023 - by HTG Team

Life insurance might seem like just another expense, especially when it’s something you hope you’ll never need. But the truth is, it could provide invaluable protection for your family if the unexpected happens.

Imagine this: you’ve recently bought a house with your partner, and they suddenly pass away. Could you cover the entire mortgage and maintenance costs on your own? And if you have kids, could you manage all their expenses and childcare as a single parent?

Life insurance is like a safety net, catching your family when life throws a curveball. It’s about ensuring your family doesn’t face financial hardship on top of their emotional grief.

So how much life insurance do you need?

We see life insurance as income replacement. It’s about filling the income void if you were to pass away. The amount of life insurance you need depends on your individual circumstances, but a good rule of thumb is to take your salary (plus bonus, stock options/restricted stock) less an estimate of federal, state and FICA taxes you pay, times the number of years you expect to work. Be pessimistic about when you can afford to retire. This will help ensure that your family can maintain their current lifestyle if you were to pass away.

What types of life insurance are there?

There are two main types of life insurance: term life insurance and permanent life insurance.

Term life insurance is the most affordable type of life insurance. It provides coverage for a specific period, typically 10, 20, or 30 years. If you die during the term of the policy, your beneficiaries will receive a death benefit. If you outlive the term of the policy, the policy will expire, and you will no longer have coverage.

Permanent (whole) life insurance provides coverage for your entire life. It is more expensive than term life insurance, but it offers several benefits, including: a guaranteed death benefit, a cash value account that grows tax-deferred, and the ability to borrow against your policy’s cash value.

Which type of life insurance is right for you?

The best type of life insurance for you will depend on your individual needs and circumstances. If you are on a tight budget or need insurance only for a finite period, term life insurance may be a good option for you. If you are looking for more comprehensive coverage, permanent life insurance may be a better choice.

How to get life insurance?

There are a few different ways to get life insurance. You can purchase a policy directly from an insurance company, or you can work with an insurance agent or broker. Some employers offer group life insurance as an employee benefit.

Consider life insurance an investment in your family’s future. It’s a gift that keeps on giving, even when you’re no longer around.

Take Action Now!

  • Take inventory of your employer life insurance options and explore providers for standalone policies via platforms such as Policy Genius.
  • In addition to reviewing the potential income loss you or your family could experience, remember to factor in larger expenses such as future educational expenses, mortgage, etc., to get a sense of your insurance need.
  • Review your life insurance beneficiaries periodically as your circumstances may change (marriage, birth of child, etc.)
  • Learn more about insurance policy types and how to calculate the amount you need in our recent blog.

 

 

The information provided is for educational and informational purposes only and does not constitute investment advice and it should not be relied on as such. It should not be considered a solicitation to buy or an offer to sell a security. It does not take into account any investor’s particular investment objectives, strategies, tax status or investment horizon. You should consult your attorney or tax advisor.

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