According to a recent survey by LIMRA, “only 44% of households have an individual life insurance policy, and 30% have no individual or employer-provided life insurance”. Term Life insurance is a very important part of anyone’s insurance portfolio. There are many ways to calculate the amount of coverage you may need. Generally the average person will need five to ten times your annual income. At Nicoud Insurance we believe that everyone has different needs for life insurance.
The first step is to figure out a time horizon. The largest risk that you are protecting with life insurance is the loss of your income if something were to happen to you. This is most important when you have young children, so a good place to start to figure out your time horizon is to see how many years your youngest child is from no longer being financially dependent on you. If your child will be self sufficient at age 25 and they are five now then it makes sense that your time horizon will be twenty years.
The next step is to figure out how much insurance you need. The goal should be to replace your income for your surviving spouse so they are still able to support themselves and any children you may have. If you make $50,000 annually then you would need a $1,000,000 policy to replace that amount for an indefinite period of time.
For example, if you have a five year old child and mortality occurred and you needed to replace your $50,000 income for 20 years, it would take $1,000,000. If your surviving spouse is the beneficiary and you were to invest the life policy conservatively, you could take between four and six percent off the $1,000,000 for an income. This would not erode the $1,000,000; therefore you would have the same income the following year.
Term insurance is currently at an all time low. A 35 year old male could get $1,000,000 of 20 year level term for as low as $41.80 per month with females being at an even lesser rate. For a free life insurance review don’t hesitate to call us at Nicoud insurance 217-546-6900.
Kolin O’Brien
Individual Life & Health Producer
Kolin.obrien@nicoudinsurance.com
