By Brock M. Alspaugh, CRPC CEO/Financial Advisor ~ Innovative Financial Solutions
Tuesday, September 6, 2022
September is here, and that means Life Insurance Awareness Month. Most people understand and appreciate the benefits of life insurance: in the event of a tragedy, death benefit proceeds can provide financial peace of mind and freedom. There are many reasons to purchase life insurance including, but not limited to, income replacement, debt repayment, child education costs, and funeral service coverage. The general rule is to have five to 10 times your income in death benefit coverage. If you are married and have young children, I would say you would need close to 10 times your income, given the multiple levels of need. Even in retirement, you may need death benefits. For example, if you are presented with survivorship options for your pension, you might be better off choosing a one-time lifetime allowance – or a percentage less than 100% to your spouse – and purchasing life insurance to cover the spouse. survivor instead of selecting 100% of your pension is also paid to your surviving spouse.
Life insurance has changed dramatically over the past decade and can be more than just a death benefit for your family. For example, I purchased a permanent life insurance policy for myself to protect my family in the event of my death. However, the cash value that accumulates in the policy can be used to supplement my social security in the form of tax-free retirement withdrawals. Another area that has changed in recent years is the ability to use the death benefit, not the cash value, to help pay for long-term care expenses. This leverage can be very advantageous compared to paying for these expenses on your own.
Like many aspects of your financial life, things change and so does your strategy. Life insurance is no different; make sure you have the right policy at the right price. Happy Life Insurance Awareness Month!