As a Parent How Much Life Insurance Should I Have?

January 22nd, 2010

One of the responsibilities with being a parent is making sure your family is taken care of, even when you are gone; life insurance is one way to ensure that your family is taken care of financially if something were to happen to you.  Now that we have that established you must be asking yourself how much life insurance is enough? What is the minimum amount your survivors would need for the monetary loss of you or your spouse? It is estimated to raise a child from birth to college can cost anywhere in the neighborhood of $700,000! Here are some quick and simple ways to get an idea of how much your life insurance policy should be:

• · Option 1: Determining Expenses (-) Assets: Figure a rough estimate of your annual family budget. This would include your mortgage, child care, insurance, food, basic living expenses, as well as extra expenses including vacations, and future education plans such as private school and college. Next, estimate a figure for your assets such as savings, social security benefits, or any other income that will be there such as the income of a surviving spouse. Remember, stay-at-home spouses contribute a lot to the family income by by-passing child care, travel, cleaning, cooking and associated costs, therefore would need to be insured also.
• · Option 2: Salary Estimate: Another quick, but more general way, would be to take your current annual salary and multiply that by 7. For example, if you make 60,000/per year then I would recommend buying a minimum of $420,000($60,000 X 7= $420,000).

If your estimate is high, good, it’s probably right. If you are worried about the premium cost, I would recommend choosing term life insurance. You can get a policy for the time you would need it (the amount of time your kids would depend on you) for a lower premium than other insurance options.

When do I Need Life Insurance?

1. Considering starting a family: If you are considering starting a family you should consider purchasing life insurance. Your rates will be cheaper now than when you get older and your future children will be depending on your income.

3. Established Families: You need life insurance now if you have a family that depends on you.

I am a stay-at-home-mom and I don’t bring any income into our household, so why would we need life insurance on me? The cost of replacing someone to do domestic chores, home budgeting, and childcare should always be considered if you die, it can cause significant financial problems for the surviving family.  Funeral expenses can also be very costly if they are not already budgeted.

4. Young Single Adults: The reason a single adult would typically need life insurance would be to pay for their own funeral costs or if they help support an elderly parent or other person they may care for financially.

5. Couples without Children: Both persons in this situation would need to decide if they would want life insurance. If both persons are bringing in an income that they feel comfortable living on alone if their partner should pass away, then life insurance would not be necessary except if they wanted to cover their funeral costs. But, maybe in some instances one working spouse contributes more to the income or would want to leave their significant other in a better financial position, then as long as purchasing a life insurance policy would not be a financial burden, it could be an option.

6. Elderly: As long as you do not have people depending on your income for support, life insurance at this stage in your life would not be necessary, unless again, you do not have any other means to pay for your funeral expenses. But, be aware that purchasing a life insurance policy at this age can be very expensive. Before doing so, first talk to a financial advisor or accountant about looking into other saving options to pay for your funeral costs before considering life insurance.

Find out more about life insurance by calling our office, or get a free Louisville Life Insurance quote online today.

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How to Avoid Accumulation of Credit Card Debt

November 14th, 2008

Soaring credit card debt can be the worst nightmare for any individual. The amount of money that is spend to pay back the interest amount of credit card debt can be judiciously utilized in other ways. Once your credit card debt starts accruing, you need to make considerable efforts to bring it down. A large percentage of people can suffer a heavy setback if they calculate the accumulated amount of interest paid by them to settle the credit card debt. This amount can be invested in savings and acquiring other necessities essential for living. The best way to curb down the credit card debt is to avoid using it frequently. The latest trend wrongly followed is to acquire as much number of credit cards as possible. Try to be in the possession of one card charging the lowest interest rate showing no considerations for other cards. Using credit cards to meet immediate inconveniences can prove to be a long term inconvenience more often than not. Make yourself very clear that a credit card is meant only for rare emergencies. This is, in fact the true purpose of a credit card.
In case you are in possession of more than one credit card then make use of this method before it starts affecting you. Transfer your debt from the credit card with higher interest rate to the one with a lower interest rate. By doing this you reduce the interest installments of your credit card debt. In case this is not a feasible option for you then follow the principle of paying the lowest debts first. Once the lowest credit card debt payment has been met, utilize this amount in paying the debt for the next lowest amount. Once the entire amount has been paid, you can utilize the monthly installment money for other purposes.

A golden rule to avoid accumulation of credit card debt is to pay back the debt with the highest interest rate and the meet the other debt payments. By following this rule you can save a considerable amount in interest payments. For instance, if you have to make payments of three different credit cards charging interest at the rate of 10%, 15% and 20% respectively. Firstly, you need to pay back the credit card debt charging 20% from you. The next priority in paying back would be the 15% interest rate and 10% being the last in the priority. You might be confused whether to pay back the debt with the lowest principal amount or the debt charging the maximum interest rate while deciding the priority to pay back. To make a wise decision you may consult a financial advisor who can guide you with professional expertise.

Consolidation of debt is another popular way of meeting your credit card payments by availing a home equity loan. Being a loan of a secured nature, the amount of interest rate required to be paid is much lower as compared to the rate of interest in a credit card. A major advantage of availing a home equity loan to meet the credit card debt payment is that the interest payment of this loan is tax deductible. This however, is not the case while paying the interest installments of credit card debt. The only drawback in opting for debt consolidation is that you might lose the ownership of your home that you have offered as a security if you fail to pay back the home equity loan amount. By following any of the above mentioned ways you can avoid the accumulation of credit card debt to a great extent and manage it accordingly.

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