Congratulations you are currently doing the best thing you can do for your family. The worst thing that can happen to your family is losing you, your loved ones will not know what they will do without you. Life insurance will help them not have to worry about the bad parts of loved ones dying, the financial burden that it causes to the loved one’s family. Life insurance is not a complicated concept, it just has a lot of different questions such as what type of life insurance do you need, how much coverage do you want, and who will be your beneficiaries. Of course, taking into account your health and lifestyle. You probably stumbled across this article because you have come to the conclusion that you want to purchase life insurance to protect your family’s financials but aren’t quite sure how much life insurance coverage to buy or if $500k is enough life insurance coverage, but don’t worry your pretty little head because that’s why we are here! In this article, we will be discussing whether or not $500k is enough, how to know if it’s enough, and we will end this article with our words to the stay at home spouse! The following are some key points from this article;
- The first thing you need to determine is whether or not you want term life insurance or a permanent life insurance policy. You really can’t move on to the next step, your coverage amount, until you finish this step.
- You honestly can’t protect your family if you don’t know how much you need every month, it isn’t worth guessing. If you die and your family gets $500k what can they do with it? They may be able to invest that money and earn 5% which can amount to $25,000 a year in salary but if your family depends on more than $25,000 a year you need more coverage.
- To assess your coverage amount yYou should multiply your income by 10 and add on $100,000 per child for college expenses. Then you need to add a couple thousand for your funeral costs and like we mentioned earlier if you have savings you can deduct that from the amount you get after multiplying and adding.
- Both parents or both spouses should be insured because the value provided by you being a stay at home spouse or stay at home parent is valuable and all the things you do need to be replaced.
Term life vs Permanent life
The first thing you need to determine is whether or not you want term life insurance or a permanent life insurance policy. You really can’t move on to the next step, your coverage amount, until you finish this step. Term life is a form of temporary life insurance and only provides you with coverage for a short and specific period of time. Term life insurance is perfect for those who only need life insurance temporarily to fit their specific needs or don’t have a big enough budget for life insurance. Term life insurance is the cheapest life insurance type in the whole market which is why we said that if you don’t have a big budget for life insurance to consider term life. Like we mentioned it only provides coverage for a short and specified period of time, this is where the word “term” comes into play. Depending on which carrier you decide to buy a term policy you will be given choices of term lengths that you can remain covered for and they vary from 5, 10, 15, 20, 25, or 30-years. When your term policy expires you can choose to cancel the policy if you no longer need life insurance but keep in mind that if you choose to do this you will have to reapply whenever you do need life insurance again and you will not be given the same rate and quote as you receive this time because life insurance companies use your health, AGE, and lifestyle into consideration and those can change in a couple of years. If you don’t cancel your term life policy it will automatically turn into an annually renewable policy which means that every year you choose to keep your policy you will be renewing your policy for another year but keep in mind that doing this will cause your premiums every year to increase incredibly! Or depending on which carrier, you may have the option to convert your policy into a permanent life insurance policy without having to go through the whole application and underwriting process again plus you get to keep the same rate you got when you first opened your term policy.
Permanent life insurance consists of a couple different types of life insurance. Whole life is a form of permanent life insurance which provides coverage for, you guessed it, your WHOLE life. This is the most simple of the kinds of permanent life insurances because it simply provides you with a death benefit and it even provides cash value as well as the other kinds. Universal life is another form of permanent life insurance and again provides you with coverage for your entire life but with flexibility. What we mean by flexibility is that you have the opportunity to change your premiums or coverage amount at any time of the policy because as you grow your needs will grow. Index Universal life is again another form of permanent life insurance in which provides coverage for your entire life with flexibility and an investment option. This type of insurance doesn’t call for your 24/7 attention because the company will do that part for you and you will receive a fixed interest rate so there isn’t as much risk as there is for variable universal life. Variable Universal life is the last type of permanent life insurance and it does provide coverage for the rest of your life with again flexibility and investment options. However, this product differs from Index universal because you will have to monitor your investments and you will experience extreme risk because there is no cap floor. All permanent life insurance products offer an opportunity to build and grow your cash value but index and variable offer your cash value to be invested and can grow quicker than whole life insurance.
Is $500k enough coverage?
If $500k is enough coverage or not is something you have to figure out only because we are not aware of your debt and all the information necessary to come up with the coverage amount that best fits your situation. You honestly can’t protect your family if you don’t know how much you need every month, it isn’t worth guessing. If you die and your family gets $500k what can they do with it? They may be able to invest that money and earn 5% which can amount to $25,000 a year in salary but if your family depends on more than $25,000 a year you need more coverage. Unfortunately, life insurance is not a one size fits all kind of thing and that’s why we can’t tell you whether or not half a million is enough coverage for you or not. We can tell you that half a million sometimes will work in your favor with life insurance companies simply because it’s the next band up from $250,000 This can be a bigger discount in the long run for you and if you want to dabble around with both coverage amounts so you can see yourself which company offers a better rate for half a million than a quarter million you can fill out our super easy quote engine below this article. If you still are debating whether or not $500k is enough coverage or not after reading this article you can feel free to contact us and we can walk you through the whole process so that we can figure this one out together.
How to find out your coverage amount
There are a couple of questions that you can ask yourself to assess the amount of coverage your family will need. The first two questions are how much debt do you have other than your mortgage? Do you add to your debt every month or do you pay it down each month? This is important to ask yourself because you have to make sure you buy more life insurance to pay it off otherwise it will get passed down and become the new debt of your loved ones.
How much do you spend each month? You can use your bank statements to figure out how much you spend each month. And to be frank, you really can’t protect your family if you don’t know how much you need every month. How much do you save each month? If you have put away some of your income into savings or college savings for your children this is a good thing and you can deduct this from the amount of life insurance you need.
How much income does your surviving family members (spouse and children) need if you aren’t around? This is the only thing that truly matters when it comes to determining how much life insurance you need but to answer this you have to add up your answers for the above questions.
Basically, you should find your life insurance policy amount by calculating your long-term financial obligations and then by subtracting your assets. The remainder is the gap that life insurance will have to fill. You should multiply your income by 10 and add on $100,000 per child for college expenses. Then you need to add a couple thousand for your funeral costs and like we mentioned earlier if you have savings you can deduct that from the amount you get after multiplying and adding.
For the stay at home spouse
Don’t downplay your importance. Without you, things around the house wouldn’t get done and you are responsible for a lot of important things such as your children’s well being. Both parents or both spouses should be insured because the value provided by you being a stay at home spouse or stay at home parent is valuable and all the things you do need to be replaced. This is because if you really think about it, if you pass away, who would manage the house, cook, raise the children, and do all the things your spouse doesn’t? At the bare minimum, the remaining parent or spouse would need to pay someone to provide the same services you provide such as child care, that you would provide for free.
Work With us!
When looking for life insurance, we always recommend everyone to shop around for quotes. This way you can make sure you are getting the best deal possible. You never know what another company will offer you and with getting life insurance being one of the most important life decisions you will face you need to make sure you are going with the best deal possible. If you have 30 seconds you should fill out our very quick quote engine below this article so that you can see for yourself what you may be offered in terms of quotes. Not only will you be able to shop for quotes in one place but you will also be able to compare those quotes with other top-rated companies at the same time! OR you can always take advantage of our FREE services, yes our FREE services, we are an independent life insurance agency who work with over 60 top rated companies but have zero ties with them because our loyalty is reserved for our clients and only our clients. We will shop around for quotes on your behalf until we find you the best life insurance company who reflects your specific needs, health, and lifestyle. Not only will we shop around until our fingers fall off but we will also fill out the application with the company of your choosing. With our FREE services, you can sit back, relax, and be worry-free. Give us a call today and let us make your life insurance experience simple!