My buddy Roman at Moneygeek.com hit me up again for some content.
Here’s a link to the bit.
And if clicking is too much, here’s the text:
Can you explain how a $500,000 life insurance policy works and who it is best suited for?
MISTAKE #1: YOU DON’T NEED IT
If no one depends on you financially, then you don’t need a life insurance policy. That’s it. Insurance exists to prevent financial catastrophe for you or your loved ones. Your 23-year-old son (hopefully) won’t be up the creek financially if you’re gone.
Similarly, your 60-year-old wife doesn’t need your life insurance because you’ve (hopefully) already saved enough for retirement.
However, your newborn still needs to go to college, needs to eat, and needs a roof over their head and toys on Christmas.
How can individuals assess whether a $500,000 life insurance coverage is adequate for their needs?
MISTAKE #2: YOU DON’T HAVE ENOUGH
New parents get the free stuff from their employer and then MAYBE have their own term policy. If they do have their own term policy, it’s usually not enough.
On average, our members who make $400–500K/year need a $1.5M to $2.5M policy. We run a detailed life insurance needs analysis, but the strategy is to replace the living expenses of those you leave behind while still coordinating with the Social Security Survivor benefits you and your kids will receive.
The rule of thumb is for every $1M, you can replace $40,000 to $50,000 worth of take-home pay.
To summarize, if you have kids, get enough life insurance to cover the take-home pay you would need to cover until they’re off the payroll.
