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Life
Events and Life Insurance Policies
The average American household has enough life insurance coverage to replace 35
months of income.1 Assuming your family is
somewhere near the average, consider how much just one major life change could
affect that time period.
The cost of
raising a child or owning a larger home could dramatically shorten the amount of
time a death benefit would last. If you have experienced these or other
significant changes recently, have you taken time to review your life insurance
policies?2
Hey,
Baby!
The birth of a child can be a time of tremendous change. Daily routines give way
to new ones. Priorities are reordered. Household budgets are revised. But it’s
also an important time to consider your insurance needs. In the absence of a key
provider, would the family still be able to afford adequate shelter and medical
care? Will the children be able to go to a good college? A two-parent family
earning $38,000 to $64,000 a year is estimated to spend about $165,000 to raise
one child to age 18. And a family earning more than $64,000 can expect to spend
more than $240,000 per child.3
On
the Move
Buying a new home, whether it’s to make room for a new family member or to
reward a career advancement, can also trigger a life insurance review. A home
can be a source of comfort and fond memories during trying times. If the
unforeseen were to happen, would your current death benefit be enough to cover
the new mortgage? Would your family be able to afford the additional upkeep most
houses require as they get older?
Estimating the appropriate
amount of life insurance for you can be a difficult task. Reviewing your life
insurance policies on a regular basis — and whenever life-changing events take
place — can go a long way toward protecting your family.
1) American Council of
Life Insurers, November 20, 2001
2) As with most financial decisions, there are expenses associated with the
purchase of life insurance. Remember, if a policy is surrendered prematurely,
there may be surrender charges and income tax implications. The cost and
availability of life insurance depend on factors such as age, health, and the
type and amount of insurance purchased. Before implementing a strategy involving
life insurance, it would be prudent to make sure that you are insurable by
having the policy approved.
3) U.S. Department of Agriculture, 2000
©
2002 Emerald Publications
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