Do you need life insurance? The answer is simple. If someone will suffer financially when you die, you need life insurance.
The more important question: how much?
You may already have life insurance through your employer, but there’s a good chance it’s not enough. Just as you have a savings account, a 401k, a college savings plan for your children, life insurance should be part of a balanced financial plan.
There are a few things to think about when considering the amount of coverage you need:
Think about your family’s needs and goals.
Many people opt for life insurance plans through their employers, but these plans often aren’t sufficiently robust. If you have a family and significant financial obligations such as the large mortgages common to many Bay Area homeowners, you may need more than what you would typically get from employer-provided life insurance. This kind of policy rarely amounts to more than three times an individual’s annual salary and can be as little as six months’ salary. How long would this last your family if something happened to you? Another downside of these plans is that you’re vulnerable to employers’ dropping life insurance benefits entirely or you may change jobs and find your policy isn’t portable.
Naming beneficiaries will help ensure that your proceeds go directly to those whom you intend, avoiding probate (the court-supervised process of distributing your estate), which saves considerable time and expense for your family at what will undoubtedly be a very difficult time.
Also, if people have a trust, it usually makes sense to make the trust the beneficiary of the life insurance. For those people who purchased life insurance before getting a trust, please revisit this.
You should review life insurance policies at least every three to five years or with any major life event—marriage, a new baby, a divorce, a major investment. If there are new people in your life whom you want to insure, you need to update your policy to provide for them. One of my previous blogs provides a reality check with 12 reasons to update your life insurance policy.
Is life insurance part of your financial planning strategy for 2016? Contact Carly Ebenstein: 510.342.2670, email@example.com, CJB Insurance Services.