Here's post number 4 in our four-part Life insurance series.
A good conversation with close friends often includes meaningful life topics like love, work, dreams, and family. But your life insurance death benefit is a topic that’s not as likely to come up! Even so, life insurance intertwines with and impacts every one of those other topics.
So let’s talk about the death benefit: Just what is it, and what does it mean? A life insurance death benefit defines your policy’s final payout, and is the amount your loved ones receive if you pass away. It determines the cost of your premiums, and it’s a linear calculation: the higher the death benefit, the higher the annual expense of the policy.
How much cost should you factor in when considering life insurance? Here are three common expenses you’ll want your insurance payout to cover:
Burial costs. The most obvious expense you need to account for is average funeral costs, between $7,000 and $12,000. While prices can vary widely depending on what sort of send-off you’d like,it’s important to make sure your loved ones don’t have to be responsible for this expense.
Mortgage and debt. Any debt you leave behind must be paid before your estate can distribute any assets to your heirs or surviving loved ones. Include mortgage loans, auto loans, and credit card debt in your total, because none of those is forgiven when you die. The exception is federal student loans, which are forgiven after the required proof of death is submitted; private student loans are not.
Future education costs. Education costs continue to rise. The average tuition for a public four-year college averages $28,000 per year per child and is expected to double every nine years. College costs can be a major factor in determining how much life insurance you need.
Don’t be spooked if the number seems big. While the relationship between death benefit and premium is linear, term insurance can provide enough coverage in early years and the premiums tend to be very reasonable, assuming you’re in good health.
Contact our office today for help figuring out the amount of life insurance coverage that’s right for you and your family.
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