As you know from my previous blog, I recently bought a new house (more house, bigger mortgage.) Also, my amazing wife Julie, and I, just had our second daughter, Elizabeth (another girl, another college, another wedding, more dresses and purses.) Since I don’t want to be guilty of planning better for my clients than my own family, I thought this was the ideal time to take a look at some of the plans I have in place for my family.
Those that know me know that I see insurance as a necessary evil. The chances are, I’ll never need it. However, when you need it, you need it. When thinking about how much life insurance I need, I think about our debts (just my mortgage), what future liabilities are out there (primarily college for Alice and Elizabeth), and how much income I need to leave Julie if something happens to me.
Next, I think about our current assets and how well they cover the above obligations. Julie and I have been diligent savers and have accumulated some assets, but not yet enough to cover all of these needs. There are also Social Security Survivor benefits payable to my wife and children should something happen to me, which would be several thousand dollars per month, but even that plus our portfolio are not sufficient to cover all my family would need.
Many years ago, I bought a $1M 30-year term life policy. To me, this is like a having a nice suit, almost everyone just needs one (the amount may differ from person to person, but some level of term coverage is just needed to navigate you through the wealth accumulation period.) I also have built my financial plan so that when that term policy expires, I do not expect to need any life insurance – long-term care insurance maybe, but not life insurance, since most retirees have no need for life insurance. After thinking through all of the above, I decided I needed more life insurance. Since properly structured term life insurance is relatively inexpensive, why would I not protect myself and my family?
My final choice was the length of time I would likely need this coverage. For example, for each year that passes, my mortgage becomes smaller, my girl’s college savings accounts grow, and my retirement and non-retirement savings grow (therefore reducing my need for insurance.) To close, I bought two more term policies, one for the next 15 years and a larger one for the next 10 years. I will evaluate the need for each of these policies every few years and when one is no longer needed, I will simply stop paying the premium.
Is my plan perfect? Probably not. I’m sure there is an elephant falls from the sky situation I haven’t planned for. Do I feel my family will be provided for should the worst happen? Absolutely. Please reach out to me at firstname.lastname@example.org if you would like to discuss the way I have planned or discuss your personal situation. Also click here to visit my profile on the Atlanta Financial website and view other relevant topics.