I see two mistakes over and over again when it comes to life insurance.
Mistake #1: Those who have it, who don’t need it.
Mistake #2: Those who need it, don’t have enough.
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 and needs to eat and needs a roof over their head and toys on Christmas…
MISTAKE #2: YOU DON’T HAVE ENOUGH
New parents get the free stuff from their employer and then MAYBE they have their own term policy.
If they do have their own term policy, it’s usually not for enough.
On average, our members who make $400-500k/year need somewhere 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 life insurance and get enough to cover the take home pay you would need to cover until they’re off the payroll.
