There are several uses of life insurance, and here is a case which I worked on this week. “Pearl” and “Steve” are the parents of two children, ages 4 and 7. When Steve’s father died early at age 42, he remembers how difficult it was for his mother to keep up with the household bills. His father only had the group life insurance policy from his employer and those funds lasted about two years. Although his mother was working, she wasn’t able to make up for the lost income of her husband, Steve’s father. Steve wants to ensure the same thing does not happen to his own family.

Pearl and Steve own their home, and their combined income is $ 85,000. They currently owe about $ 30,000 in student loans and credit cards. To calculate how much life insurance they should have, the goal is pay off the outstanding mortgage, all outstanding debt, account for final expenses, fund the college education for both children, and have 4 to 6 years of income for the surviving adult. They owe $ 225,000 on their mortgage and want to make sure each child has at least $ 100,000 for college. The insurance need on each adult is $ 895,000. Pearl is 32 and Steve is 33 and do not smoke. Pearl has a $ 100,000 and Steve has a $ 125,000 group life insurance policy so we subtract those numbers from the total amount needed. The cost of their premiums per month is $ 96 to purchase 20 years of term for $ 795,000 Steve and $ 770,000 for Pearl. After 20 years both children will hopefully be out of college so the insurance need would be much lower by then. $ 96.00 a month is a small price to pay to ensure your family’s financial security. Its roughly the cost of two dinners at a restaurant a month – which is more important?

They also placed a juvenile policy on each child: $ 25,000 term which they can keep up until the child turns 30 and its $ 3.50 per child. This policy also makes the children eligible for scholarships through Modern Woodmen of America along with many other free fraternal benefits.

As they get closer to the end of the 20 years, we can look at converting a portion of the term insurance to a permanent solution, and at the same health rating they got when they were in their30′s.

This case study illustrates the need for additional life insurance outside the group life insurance offered by an employer. Most families with children need a minumum of $ 500,000 on each adult, and usually closer to $ 1M+.

To find out your family’s life insurance needs, please call me at 919-943-5577 or e-mail me at nancy.j.williams@mwarep.org. Please visit my site at healthinsuranceraleighnc.com.

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There are several uses of life insurance, and I am going to share a case that I worked on last week.

I met with a young responsible woman, named “Leah” who lives in Raleigh. Leah is in her 30′s and is taking care of her elderly grandmother. Her grandfather had recently passed away without any life insurance – which is so often the case these days – and she wants to make sure the same thing doesn’t happen with her grandmother. Although her grandmother is 72 years old, she believes she will live a long life and wants to purchase permanent insurance so that no matter when she does pass, life insurance will be in place.

To meet that need, Leah purchased a $ 50,000 whole life insurance policy that will be fully paid up in 20 years. Even if Leah’s grandmother lives to be 100, a $ 50,000 policy remains in force even though premiums were discontinued at age 92. If Leah were to take the same amount of money as the price of the premiums and set it aside in an investment account, she would not be able to accumulate the same $ 50,000 in proceeds, thus making the life insurance policy a sound investment with the added protection if her grandmother dies early.

In addition, Leah purchased a $ 100,000 permanent life insurance policy on her own mother, which will also be fully paid for in 20 years. (At Modern Woodmen of America, whole life policies can be set up to be paid for in as little as 10 years or can be set up to pay on them until endowment.) Regardless of when Leah’s mother passes, whether it be next week or 30 years from now, Leah will receive a sum of $ 100,000 (tax free). Once again, if Leah put those same funds to work in a strong investment account, Leah would NOT earn the same $ 100,000 over the course of the expected life expectancy of her mother, and she certainly would not receive them tax free.

This is a very practical use of life insurance – it can be used as part of a retirement strategy not just for the policy owner but also for the beneficiaries. Although we don’t like to think about it, our parents are going to pass away – fact of life. The only variable we do not know is when. In addition to the retirement strategy, it gives the beneficiaries the funds they need to take care of final expenses, which often falls on the shoulders of the children that are left behind.

If you’d like to take a look at this concept for your own family or someone you know, please call me at 919-943-5577 or e-mail me at nancy.j.williams@mwarep.org. I also invite you look over my website at healthinsuranceraleighnc.com.

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