Life insurance is the building block of a financial plan. Life insurance allows a financial plan to be self-completing if you fail to survive until the goals of your plan are met. Determining the amount of life insurance need is an exact science. You can discover the number by answering an in-depth series of questions. The first number needed in the equation is current debt. Add you mortgage, car loans, student loans, and credit cards to find this number. The second question to be answered is the amount of funds needed to replace your income. I use the number of 5%. For example; if I made 50,000 annually, I would need 1M dollars invested at 5% to replace my income. The third question to be answered are financial goals. These goals can include sending your children or grandchildren to college. As obedient stewards, I recommend we leave funds to the Kingdom at our passing as well. Lastly, the actual cost of burial. A number often used is 15k. By answering these questions, a person a make a good determination of the amount of insurance needed to replace them. We can never be replaced as a spouse, father or mother from an emotional standpoint, but leaving your survivors without adequate funds to carry on with their life and the goals you made together can be devastating. Once you have determined the need, solving the need can be done in several ways by laddering term insurance. Often, the needs carry a different time frame. By structuring term insurance based on the length of years the need is present can save you money that can be used within the financial plan in other areas such as creating an emergency fund, retirement funds, or being aggressive in eliminating current debt.
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