The Finance Blogger


Nearing retirement how much life insurance do you need?

September 14th, 2016 ernie Posted in Life Insurance No Comments »

Nearing retirement how much life insurance do you need?If you are nearing retirement how much life insurance do you need? This is one of the big questions that many retiree’s ask themselves. There are good reasons for having life insurance. However if you do not fit into these, you may not need life insurance. We have been wondering about this question for some time. There is no single answer for everyone. Instead it depends on your personal situation, your risk tolerance etc. Some people just do not care. Others cannot afford to pay for life insurance. Many have not really thought about the question and have no life insurance.

This post attempts to list some of the reasons a consumer should consider life insurance coverage. It also assumes that the average consumer can afford the monthly payments and feels that they want to take responsibility for their family, debts that they may have and of course providing for their loved ones.

Nearing retirement how much life insurance do you need?

Fundamentally, life insurance is purchased to provide cash after you have passed away. The reasons vary, but it really comes down to this one issue. If you have a lot of debt and want to have this debt disposed of when your gone, life insurance can solve this problem. Car loans, mortgages, personal loans and credit card debt can all be paid off by life insurance. Add up your total debt and arrange for enough life insurance to cover this amount. Your family will not have to sell your assets to pay for your debt that remains after you are gone.

Another reason many people have life insurance is to provide income for their dependents after they are gone. You might need to have a great deal of insurance coverage if you want to replace your income with income from investments. For example a one million life insurance plan will generate $50k at 5% if it is fully invested. Depending on your age you could also draw down on the principle.

Combine your debt repayment needs and your income generation needs to determine the total amount of insurance that you require. Every year re-evaluate your needs, especially nearing retirement how much life insurance do you need?

 

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Life Insurance Estate Planning

March 7th, 2013 ernie Posted in Life Insurance No Comments »

Life Insurance Estate PlanningMany people find life insurance estate planning complicated and emotionally draining. It really does not have to be either of these things and with a little help it can be simplified by answering the following questions as preparation for when you pass away and want to make sure that your estate is in good shape. This is the adult responsible thing to do as a parent and an adult to make sure that your family is looked after when you are gone. It is emotional, but it is something we all have to face at one time or another.

Life Insurance Estate Planning – Basic Questions

For example here are some of the basic questions that consumers should ask themselves which will help them decide if they need life insurance as part of their estate planning and how much insurance they really need. Here is our list of questions:

  • What are your current debts and how will they be paid
  • Will your estate have enough funds to pay these debts
  • How many dependents do you have
  • How long will you need to provide financial support for these dependents
  • Will your current assets be sufficient to cover all of the above

Depending on your answers you may need to add some life insurance to make sure that your estate will have sufficient funds to cover each of these issues mentioned above. In addition many people want to leave some form of legacy to their heirs and this is sometimes an amount of money that they know will be put to good use and will help them in their own lives.

For this reason, some consumers will also increase their life insurance coverage to provide some money for each of their heirs. This is certainly optional. Many consumers say they plan to spend everything before they die and that is ok to. We just believe that you should cover your debts and provide for your dependents so that no one needs to suffer for any reason.

People will also provide for their pets to make sure they go to a good home and that they are provided with food and lodging for as long as they live. Pets are part of the family and in some cases rank above other family members, It is hard to believe that this is the case for some families, but that is the way it is for some people.

Life Insurance Estate Planning – Wills, Executors, Division of Assets

Whatever you decide to do is your business; however there is one area that we feel very strongly about when it comes to life insurance estate planning. Make sure you have a will and have appointed a set of executors to carry out the wishes of your will. Otherwise the government will step in and make decisions that you might not have made had you been able to.

We also believe that the assets should be divided evenly among your heirs and you should not favor one or the other. Treat them equally and they will remain friends for life. Treat them unequally and they will become distant over time which is something we really do not think that anyone would want to see occur.

Life insurance estate planning does not need to be any more complicated than that. However if you are more comfortable with working with a financial adviser or your lawyer this is ok too. Many have had a lot of experience in this area and can make suggestions regarding the preparation of a will and how much insurance you may need. Always seek independent advice from the experts about life insurance. A life insurance sales person will usually recommend that you need to purchase insurance. Ask for and obtain independent advice to obtain the best answer.

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How long do I need life insurance?

November 21st, 2012 ernie Posted in Life Insurance 1 Comment »

How long do I need life insurance?This is a tough question that many baby boomers are trying to answer – How long do I need life insurance? They are near retirement or have retired and are trying to figure out when or if they should decrease or eliminate their life insurance. Your spouse should also be part of this discussion since any decision you make is going to impact them as well and will make a potentially huge difference in their lives if one spouse passes away and there is no life insurance or insufficient assets to provide for the remaining spouse.

The fundamental question is whether there will be sufficient funds to provide for your death, to support the surviving spouse in the proper way and to deal with any debts that you may leave behind. This is the question that needs to be answered and you can start by gathering all of the facts at the present time.

How long do I need life insurance?

What Information do you need to help answer this question?

This is a small list of information that should be gathered to help answer the question. Here we go:

Income

  • Assets including savings and value in your home
  • Current income for both you and your spouse
  • Income that would stop if you were to pass away
  • Current amount of insurance of all kinds

Expenses

  • Current debts
  • Funeral expenses
  • Living expenses
  • Living expenses that would terminate upon your death
  • Health care expenses

Once you have all of this information, you can begin to calculate whether there will be enough money to fund all of the expenses that will exist after words for your estate. There are various calculators that can help, however we find that creating a spreadsheet with all of this information is a huge help allowing consumers to consider various scenarios.

Common Sense Approach To Insurance

If you are retired and have sufficient income to cover you and your spouse for expenses and the quality of life you desire, then maybe you will want to consider dropping or decreasing your insurance. If your income will drop significantly if one spouse passes away, you may need to consider retaining insurance to cover this loss of income.

There are also health issues to be considered. If you need to add insurance or change your insurance, the time to do this is when you are still healthy. Once a serious health event takes place, the cost of insurance can go up dramatically or you may not be able to get insurance at all after a health event. Consider taking out more insurance now when you are healthy if you feel that you need this insurance.

The early 50’s is the best time to address this issue and take whatever steps are needed at that time to address your insurance needs. Once you hit 65 or retire, re-evaluate your options and make a decision based on the facts at that time related to your financial situation.

Not Easy Questions

These are not easy questions to answer. There are some facts to work with; however there are many unknowns to deal with as well. Your decisions about these unknowns will impact your life significantly if you make the wrong decision. Our suggestion is to gradually decrease your life insurance after 65 if you have sufficient finances to handle all situations. Another is to read blogs like this one and use some of the calculators that are available online. But the best approach is to develop your own spreadsheet. Update the numbers every year to help you decide when it is best to decrease your life insurance. You can also take into account inflation and other special events that you may not have originally thought of.

Even if you only get your planning 50% right, it is better than no plan at all. Start today with a plan for your life insurance to assess what is needed. As you get older, your life insurance cost is going to increase. This is another factor to take into account.

Start your assessment today to begin your plan. Discuss it with you’re your spouse and other close family members. Make sure that you are covered adequately and that everyone is informed.

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Insurance for Funerals

June 21st, 2012 ernie Posted in Life Insurance 1 Comment »

Insurance for FuneralsThese posts about Insurance for Funerals. The need for life insurance for baby boomers also includes insurance that you may need to cover your funeral costs. An old aunt of mine prepaid her funeral including the casket and the service She even set money aside for the payments to the minister and all services that were needed. She did not have an elaborate funeral. But she knew how she wanted it to be organized and so she arranged everything prior to her death.

This really made it easy for all of us who were executors of the will and responsible for making funeral arrangements. It also provides peace of mind for those who want to make sure there is not a huge burden for those left behind. This is something to think about, Insurance for Funerals. It is also very difficult for anyone to deal with as well. We all want to continue living, but at some point need to face our own mortality.

Insurance for Funerals

The following is a list of reasons you may want to have life insurance in place, however this post will deal specifically with insurance for funerals.

  • How many dependents do you have
  • How long will you need to support those dependents
  • What about education requirements
  • How much debt do you have
  • What income level will remain from pensions, savings etc
  • What will your burial costs be
  • How long will your dependents live e.g. your spouse
  • Will your estate owe substantial taxes
  • How quickly will your assets be turned over to your dependents

Risks of Prepaid Funeral

The risk that my aunt took in doing it the way that she did was related to whether the funeral home would even be in business when she passed away. The funds were put in a trust so that they earned interest until the money was needed and it was protected by the trust that was set up legally. In fact the funeral home she originally dealt with did go out of business and was bought out by a larger firm. Everything was  transferred including the obligation and the trust that has been set up. As it turned out there was no problem what so ever.

This is not the case for all funeral homes, so if you plan to do it this way, make sure you check them out first and make sure that the money is protected and cannot be stolen. You want it there when it comes time. You can even get a lawyer involved if needed to make sure that all documents that you will sign are proper and protect you, your family and your funds.

Insurance Plans for Funerals

You may also consider purchasing insurance on your life. The proceeds from the insurance when you pass away can be used for paying for your funeral. Unfortunately there may some delay from the time you die to the time that the money becomes available. Arrangements must be made with the funeral home to handle the amount owing until the funds become available.

Many will  give you thirty days to pay. Provided of course that some percentage is paid at the time that the funeral is completed. They will provide their terms and it will be up to your executors to negotiate what every they can to give them the time needed to acquire the funds for payment.

There are many approaches that can be taken. Always take someone you trust along with you to assess what ever plan you are considering. Unfortunately there are lots of scams and they don’t care if it is your funeral or not. Make sure you have a contract, check reviews, and confirm that the company is registered with the Better Business Bureau.

 

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Over 50’s Life Assurance

May 21st, 2012 ernie Posted in Life Insurance 1 Comment »

Over 50's Life AssuranceWe wanted to call this Baby boomer life assurance, but it turns out this is not something people search for. They are looking for over 50’s life assurance which roughly amounts to the same thing. We are going to focus on the baby boomers, the people who are retiring and ask ourselves whether they really need to have life insurance or not.

In our previous post, “Do I need life insurance”, we listed some of the reasons why the average person may need to have life insurance. These same questions apply to people over 50 and to baby boomers who are slightly older as a rule. The answers may be quite different since the 50’s are those transition years when the children have finished school and are supporting themselves and unfortunately our parents have passed away.

Over 50’s Life Assurance

For example your only dependent may be your spouse, there are no education requirements and your mortgage is fully paid up. The only thing  you really need to be concerned about is making sure that your spouse has enough money to live comfortably after you are gone.

  • How many dependents do you have
  • How long will you need to support those dependents
  • What about education requirements
  • How much debt do you have
  • What income level will remain from pensions, savings etc
  • What will your burial costs be
  • How long will your dependents live e.g. your spouse
  • Will your estate owe substantial taxes
  • How quickly will your assets be turned over to your dependents

Life Assurance for over 50 or over 60?

At 50 years of age, you probably still have kids in school since people had their children later in life as a rule and so they are dependents for a longer period of time. We all are living longer on average and we need to make sure that we have support for a spouse for a longer period of time. But once you reach 60 years of age, there are many changes in your lifestyle on average. We listed a few that will have an impact on your life assurance decision:

  • You may be retired
  • You and your spouse have a retirement income
  • Your kids are now self-sufficient
  • Hopefully you have few debts and have a mortgage free home, car etc
  • Your dependents really only consist of yourself and your spouse

Do You Need Life Assurance

Depending on your answers to these statement, you may no longer need to have a lot of life assurance coverage whether you are 50 or 60 years of age.  The life assurance companies would like to sell you some of their products, but why do you really need to carry life insurance at this age when you have no dependents, you have sufficient savings and you have little debt.

The only thing you really need to be prepared for from an estate perspective is :

  • Sufficient funds for your burial
  • Sufficient funds for any debts that you may have
  • Sufficient funds to support your surviving spouse

Other than that any proceeds from a life assurance package you purchase is just going to the estate and your heirs.

Support for Your Spouse

There is one huge item that we have yet to discuss. Canadians will know that their medical bills are taken care of by the government. They may have to pay for time in a nursing home and these costs can add up to large amounts. American on the other hand who do not have some form of medical coverage could find themselves with huge medical bills which could make life very difficult for a surviving spouse. this is were having both health insurance and life insurance may be something to consider.

If you want to make sure that your spouse gets some assistance in paying the medical bills and nursing home care, then life insurance to cover these kinds of bills is definitely worth while.

We would like to hear your comments on this issue and your thoughts about life assurance over 50 and whether you feel it is needed or not. Even the experts are welcome, since this question is very much of interest to millions of people who are over 50 or even in the class of people considered baby boomers!

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Do I need Life Insurance

May 7th, 2012 ernie Posted in Life Insurance 1 Comment »

Do I need Life InsuranceMany people ask themselves this question every day, Do I need Life Insurance and if so how much. Then there is what kind of life insurance and how expensive is it. As I dig into this more and more, I am finding that it is a very personal decision based on your own circumstances. What do we mean by circumstances? Well here is a list of factors that a consumer may want to consider as part of their decision process.

  • How many dependents do you have
  • How long will you need to support those dependents
  • What about education requirements
  • How much debt do you have
  • What income level will remain from pensions, savings etc
  • What will your burial costs be
  • How long will your dependents live e.g. your spouse
  • Will your estate owe substantial taxes
  • How quickly will your assets be turned over to your dependents

There may be other questions, but these are some of the big ones that many people try to take into account as they try to decide how much insurance they need or if they even need any life insurance. We will tackle a few of these issues in this post  about, Do I need Life Insurance. Several future posts as we try to figure this out for ourselves as well as trying to give our readers a different perspective on life insurance.

When Do I need Life Insurance

I guess that if you did not have any dependents. If you did not care if your estate could pay any outstanding debts or not. Or if you had enough to pay for a burial service then you would not need to consider purchasing any  life insurance.

Most people want to make sure that their debts are paid for and that there is enough money to pay for a decent burial service. This could be life insurance as low as $5000 for a burial with a no debt situation to the sky is the limit if there are a lot of debts. Where it really gets complicated is when there are dependents who depend on you for their quality of life. No one wants to think about their dependents suffering after you are gone. Who are the dependents?

Well they can be:

  • Your spouse
  • Your children
  • Elderly parents you are looking after
  • Children that are disabled

These are people who depend on you to be there and to pay for housing, food on the table, clothes, education and special needs that run the gamete from nursing homes to special equipment. Each has their special needs. We all should give some thought as to how much life insurance we need to make sure these dependents have enough to live on after we are gone.

Baby Boomers – Do they Need Life Insurance

Again this is a personal situation that depends on pensions, savings and retirement savings. Can your spouse live on what you have and will have after you are gone? This is the question you really need to answer for yourself.

Once your house is paid off, the car is paid for and you have sufficient income to pay for the daily expenses, do you still need life insurance?  It can get actually quite complex even for baby boomers.

Young Couples with Children

You are busy trying to make a living and looking after your kids. You really do not have a lot of time to think about something like life insurance and perhaps not a lot of extra money to pay for life insurance.

But what would happen if one or both of you passed away with no life insurance. How would your spouse and children survive? Who would look after them? Who would pay for the basics such as food, clothing and shelter let alone getting an education?

These are the types of questions all parents need to ask themselves and the answers vary depending on the age of the children, the savings that you have and your aspirations for your kids and your spouse.

As we explore this subject in more detail we will discuss what baby  boomers need to think about concerning life insurance and also what young parents need to consider in subsequent posts. If you have comments or would like to contribute a post please let us know. All helpful comments are welcome.

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