In this article today I would like to discuss several tips, tricks, and tactics that you can use to protect your family with life insurance.
Nobody really likes to deal with insurance, I have no illusions about that! We are bombarded by insurance most of our lives; whether it is car insurance or health insurance or homeowners insurance or travel insurance or any of the other hundreds of different types of insurance we may have to deal with throughout the course of our lives.
Even though it may be a huge hassle, there is one form of insurance that most people don't bother with but it could be one of the most important insurances for you to have.
I'm talking, of course, about life insurance.
In this article I'd like to talk about several reasons why life insurance is so important and how you can use it to protect your family in case something happens to you or your spouse.
The first thing life insurance does is protect your family income.
What happens if you were to die and you are the breadwinner of the family? Most families don't have an answer to this, especially younger families who may not ever have even thought about what would happen in these circumstances.
It's fairly easy to calculate how much insurance you will need to cover lost income in the case of your unexpected death.
Basically just take the amount of your annual earnings and income and subtract out the amount of income tax that you pay and also subtract out any payments you make to retirement plans or savings accounts.
What is left over after you make these simple calculations is basically what your family needs to live off of.
You need insurance in the amount that you can invest and earn a yearly return that is equal to the amount you calculated just now as your living expenses.
So let's say you need $50,000 a year for living expenses.
Now let's imagine that you can receive an investment return of 5% per year.
Basically you need enough money that when invested at 5% year will yield $50,000.
In this case, you would need about one million dollars.
(1,000,000 x.
05 = $50,000) To calculate the amount just take the dollar amount of your living expenses and divide it by the percentage annual yield you're likely to receive.
You will probably invest your money in US government bonds because they are the most safe, so find out how much long-term US government bonds are paying out at the moment and that is the interest rate you will earn on your investment.
So if treasury bonds are currently paying out 3% and you need $70,000 to live, then take $70,000 divided by.
03 and that will give you the amount of life insurance that you need to purchase...
in this case a little over $2.
3 million.
So there you have a very simple way to figure out exactly how much life insurance you will need to protect your family and replace your lost income if something unexpected and tragic happens to you or your spouse.