Archive for the ‘Insurance’ Category
Not a whole lot of people like to talk about life insurance, and that’s completely understandable. But it’s an essential part of financial planning – if it’s not addressed and kept up with over time then it can lead to serious financial burdens for families.
Who Needs Life Insurance?
The short and easy answer is that every independent adult needs some type of life insurance coverage? Why? Because dying is expensive, no matter when it happens. The average funeral cost is somewhere in the neighborhood of $10,000, and when you add in other factors such as probate costs, various taxes, earnings lost by family members due to grieving, etc, etc – the ‘cost of dying’ factor could become considerably higher.
Two groups of people who generally need considerably more life insurance coverage are parents of dependent children and business owners. If somebody relies on your income to support them and pay the bills, you generally need at least ten times your salary or more in coverage to protect that potential cost. So if somebody has dependent kids and makes $75,000 per year in income, a good rule of thumb is that person needs at least $750,000 in life insurance coverage in order to predictably replace most of their income over an extended period of time. Of course, more precise calculations can and should be made before determining exactly how much you need.
Business owners face a different set of challenges on top of potential income replacement needs for the family. How does their business function without them? How will the family be made whole for the portion of the business that they have inherited? If there are business partners involved, what arrangements are made so that they can move forward constructively?
All of these questions should be addressed ahead of time with proper business succession planning. These plans often involve legal agreements (often called Buy-Sell Agreements) and insurance policies between co-owners that are designed to ensure that all parties (family, business, co-owners) are protected in the event of an unforeseen death or disability of an owner.
If you have any questions about any of these issues, please feel free to email us firstname.lastname@example.org or call us at 919-576-0609.