Life Insurance - Part 2

When purchasing insurance, considering do you want the mortgage paid off with the life insurance proceeds? Do you want to finance the kids' college education?

Recently, Social Security sent you a benefits statement that  contained your Social Security benefits along with the survivor benefits for your children should you die. Find it! Call Social Security or visit the association's Web site to find out what your family will receive in benefits if you should die. This monthly benefit will replace part of the loss of your income.

If you do not pay into Social Security, the state, country, or federal government retirement plan you belong to has a benefits program for your dependents should something happen to you. Part of your planning process should be to know what these benefits are and to put the information in your master file.

When purchasing insurance, there are some decisions you need to make. Do you want the mortgage paid off with the life insurance proceeds? Do you want to finance the kids' college education?

Now, get ready to do some math or to get some help from your insurance agent, who should be willing to do a needs analysis for you? What would your family's expenses be for the next year following your death, including the funeral expenses? What are the long-term expenses the family will face, such as college funding? If you have two kids and you want to sent them to a state school, it could cost $75,000 for each of them in 10 years. The mortgage may be $100,000. This alone adds up to $250,000 that you may need covered when you die. Then there is the income you provide minus the Social Security benefit your family will receive. Multiply that annual number by as many years as your family will need it. For example, it could be $22,000 times 13 years, which adds up to another $286,000. So, in rough numbers, you would need $500,000 of life insurance. Now, if you can't afford that much insurance, you begin to look at how your family could live differently once you are gone. Does your spouse downsize and sell the house? Do the kids pay for their own education?