Welcome to Ken's Financial House. Last time we talked, I told the story of my wife and I buying a new car in a post-pandemic, supply-chain shortage world. In that story, I mention a situation where a salesperson doesn't drive the cars he sells and how THAT prompted me to outline my Financial Plan for all of you to see. A quick refresher here.
Over the next few posts, I will outline what my personal financial plan looks like and why I do and don't do some things. Today let's start off easy; Life Insurance
When you sit down with an insurance advisor, they SHOULD run through a needs analysis to gauge how much life coverage you actually need. The things that we look to cover include:
If you die, wouldn't it be great if your survivors didn't have to worry about paying the mortgage to stay in the house your family made a home?
If you aren't here, you aren't making money and you aren't helping pay the bills. We look to replace income for a set period based on factors like any income gap, lifestyle, and the
number of young children you have to support
If you are no longer with us, that's one more income that is not available to help send the kiddies off to post-secondary
When you die, the majority of your assets roll over to your spouse tax-free. When they die, it pretty much all becomes taxable. That could be a big number. Insurance can be used to
pay that bill
In my case, I have a mortgage, 4 kids under 18, and a spouse who doesn't work much outside the home. Going through my own assessment, I require a little over $3 million of coverage. That, for a young family, would cost too much of our disposable income ($4,600 a year for 20 years).
Here is what I say to clients in this same situation: I will show you what is "required" but we all know that could be impractical. Let's work with your budget and find out what we can afford that will significantly help your family if you're not here
I opted to have a $1 million policy on myself ($1,275 a year) and $500,000 ($310 a year) on my wife (also policies on all the kids, more on that later).
I share this with you to show that I will not suggest or advise anyone on something that I wouldn't do myself. If you are the curious type and want to see how much life insurance you SHOULD have, head over to my resource page HERE and find out. Also, if you have coverage and want us to look at it, give us a call; your life insurance should be looked at regularly to make sure you are protecting everything in your always-changing life.
Kenneth Coombs CFP CHS RRC
Ken has worked in the financial services industry since 2005, is a Registered Retirement Consultant, and is a Certified Financial Planner. Ken has written financial planning columns and has been a guest on financial radio and podcast programs.