Zeroing In on Your Life Insurance Needs
Updated: Jul 20
How much life insurance do you need? A reasonable guide to follow may be to purchase an amount equal to five to seven times your annual income. But this approach may not be the best for the appropriate coordination of your life insurance needs with your overall financial goals.
A better alternative may be a financial needs analysis, which can help determind your short-and long-term financial needs and those of your family. Here are some of the most common goals you want to achieve with life insurance: use them to calculate the amount of life insurance coverage you may need:
Protect your home.
Your first consideration may be to obtain adequate life insurance to help pay the mortgage remaining on your home. If you are carrying a large mortgage, you may need a sizable amount. If you own a second home, the mortgage on that home should also be factored into the formula.
Secure your children's future education.
Many people want adequate life insurance to help fund their children's college, and possibly graduate school, tuition, and expenses. The amount needed can be estimated based on the ages of your children and the anticipated return from the investment of life insurance proceeds during pre-college years. This figure should be compared to projected college costs adjusted for inflation and revised periodically as your children get closer to college age. Keep in mind that it can be difficult to accurately project inflation and earnings for future years.
Provide supplementary income for your spouse and family.
The amount of income needed to help provide for your surviving spouse and dependents will vary according to your assets, retirement plan benefits, Social Security benefits, and spouse's earning power. Many surviving spouses may already be employed or may plan to find employment, if needed. However, your spouse's earnings alone may be insufficient to cover the monthly expenses of your family's current lifestyle and future needs. Providing a supplemental income fund through life insurance may help your family maintain its current standard of living.
Provide funds for estate tax liability.
Life insurance has long been recognized as an effective method for creating liquidity at death so that estate taxes can be paid, and asset transfers to heirs can be maximized. Be sure to consult with a qualified legal professional if you want to use life insurance this way.
Here's How to Choose a Residence
Each assisted living facility/residential care facility offers its own unique services and atmosphere. If there are many choices in your area, visit several before making a choice. You should be asking the following questions:
What types of services are available? Do employees or independent contractors provide these services?
How much input do residents have in their daily schedules and care?
What range of accommodations are offered?
What's included in the cost? What extra services can be added?
Can residents bring furniture or other personal items from home?
What kinds of social and recreational activities are offered?
Does the facility provide levels of care or would a move to another facility be required if additional care arises?
The facility's licensing status, safety, and the environment is also critically important. Consider the following steps if in question:
Ask to see the most recent licensing inspection report from the state
Examine the physical aspects of the facility including cleanliness, lighting, accessibility, and modifications, such as handrails and grab bars.
Ask about features or systems used for residents to get help quickly or in an emergency situation
Observe the staff. Are they respectful and friendly? Do they seem to be enjoying their work and care about their residents? What are the minimum qualifications to provide care?
The yearly costs of assisted living/residential care facilities in the U.S. average of $42,000 in 2014. However, cost can vary tremendously based on location, accommodations, and selected services. Some residents self-pay, using personal savings. Those who qualify for Medicaid may be eligible for financial assistance if the state has been approved for a home and community-based waiver.
With limited public assistance available, long term care insurance has become a viable funding option. Many policies cover assisted living/residential care facilities, but it important to review your policy to determine your specific coverage. To learn more, visit the National Center for Assisted Living at www.NCAL.org.