Do I need life insurance? (Click here for this month’s download resource)
Life insurance is about protecting the people you care about most. We cannot know when we will need it, but we do know it is important to have it in place before that time.
Life insurance can help prepare for the unexpected, to make sure your family will have financial resources if tragedy occurs.
How much life insurance do I need?
Let me start by saying, you are worth more than you think. Life insurance agents and financial planners have their own way to determine what that magic number is for you. Of course, your very specific circumstances and needs will impact that calculation.
To get a general idea, we suggest you apply the DIME formula:
- Debt – How much do you owe and what final expenses may you have?
- Income – What is the annual income needed to support your family, and for how many years?
- Mortgage – Do you have a mortgage on your home?
- Education – What funds will be needed to educate your children?
As your income and expenses rise, it is a good practice to review your coverage every few years. If you have other unique situations — such as business entities, providing for charity, taxes — you may want to consider additional coverage.
Reviewing Your Life Insurance Coverage
When you purchased life insurance, it was likely to meet specific needs should your untimely death occur. Since your purchase, what has changed and how might that impact your life insurance needs?
Some life-altering events may require that you increase your insurance coverage. Marriage, the birth of a child, a new business venture, and a home mortgage are only a few things to consider when reviewing the amount of your current coverage.
On the other hand, are you carrying life insurance to cover specific needs or obligations which have already been met? Have your children completed college and set out on their own careers? Have your home mortgage and other debts been paid from income or other assets?
If you have life insurance that is no longer needed for its original purpose, consider these options:
- Cancel the policy to save paying the premium. This may be especially appropriate if there is no cash value and the premium amount is a burden.
- Check to see if the cash value is sufficient to pay the premium. Some policies have this feature.
- Maintain the policy but name a favorite ministry or two as beneficiaries.
- Gift a policy to a ministry, receive a charitable tax deduction, and help provide for a work you love. Additional deductions may be available for gifts to pay ongoing premiums.
And finally, as you review your life insurance, do not forget to review beneficiary arrangements, settlement options, and its place within your total estate plan. You may find our eBook, A Steward’s Consideration of Life Insurance, helpful. You can download your copy here. And if we can answer any questions as you make your review, please let us know.
May We Help?
It is always wise to seek counsel and advice from an expert when you consider life insurance as a part of your future planning. Before you do, you may find our eBook, A Steward’s Consideration of Life Insurance, helpful. You can download your copy here. And if we can provide assistance or encouragement along the way, please do not hesitate to contact Jeff Coon at Jcoon@fameworld.org.
©2021 CDF Capital Foundation