How Much Insurance is Enough Insurance?

CalculatorA $1.5 million term life insurance policy will cover the bills if one spouse dies. But it may not provide an inheritance for your kids, NJ 101.5 says in a recent article, “Do you need more insurance?”
If leaving an inheritance is important to you, start this process by taking an inventory of all your assets. Look at how they may factor into your support during retirement and see what might be left as an inheritance. This exercise may result in discovering that you already have money that will make a nice inheritance for your children someday in investment or retirement accounts. In addition, your primary residence could be a source of inheritance.
Before you buy more insurance, talk with an estate planning attorney about your options. Your attorney will help you review your situation and make projections for where your assets may be in the future.
If you conclude that more insurance is needed, you’ll have to decide the type. Term insurance can be a cost-effective way to provide income replacement during your working years, but look at your policies to be certain you know how the premiums may change in the future.
You can also consider policies like whole or universal life. These may be a better choice for leaving an inheritance. The annual premiums for permanent insurance will be greater for a similar amount of coverage, but these policies can accrue cash value that can be used while you are still alive.
When you weigh your new insurance options, it’s critical to calculate the cost of the premiums into your current and future budget.
Reference: NJ 101.5 (June 27, 2016) “Do you need more insurance?”

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