Life Insurance Personal Finance

Why? If someone (anyone) will suffer a financial burden if (when) you die Last expenses Unpaid bills Mortgage Lost income Education of children Business continuation Estate taxes

How Much? Look at the list on the prior slide and total what your needs would be Many financial planners use 5x annual income as a reasonable approximation if you have a family Needs change during your life

Premiums If premiums are paid with after-tax dollars, the benefits are totally income-tax free (but may be subject to estate taxes) Premiums are based on: Age Sex Health Occupation Type of insurance Amount of insurance Tobacco habits

Things to Consider Beneficiary must have an insurable interest Policy is usually incontestable after two years Suicide during the first two years usually isn’t covered Misstatements of age, health, smoking, etc. on the application can invalidate the policy during the first two years Waiver of premium benefit is often automatic but can be removed Accidental death insurance is usually not a good idea Second-to-die helps with estate taxes Guaranteed insurability option is good if you think you’ll need more coverage later

Things to Consider Insurance is only a promise – and a long one at that Make sure the company making the promise will be there A knowledgeable and helpful agent is worth something But remember how they get paid There is always a 10-day free-look Insurance is for insurance – not primarily for savings