I know I need more life insurance. I've been planning to get more ever since we bought a house last May. I have a few reasons that I've put it off, but I know I should stop making excuses and do it!
We aren't completely without life insurance at the moment. I have a little more than twice my salary from work. My pension also provides a death benefit that would be about $1,500 a month to my wife. Finally, there would be a small amount of social security that my wife would collect as well. If you add that all up it is in the ball park of $200,000 plus $1,500 a month. That is enough to pay off all of our debt (including the mortgage) and leave my wife a little money each month to get by.
Based on what I have already, I know we are currently ahead of many people out there. However it certainly isn't enough to replace my income. I'd say that it would cover about 40% of my current income and that would leave a lot of strain on those I may leave behind. I'd prefer to be able to cover the mortgage and then leave 80% of our current income less what would have gone to the mortgage. That may seem convoluted. Instead, here is how it works out.
| Current Income | $80,000 |
| COL Reduction w/ One Person | 80% |
Wife's Income | -$10,400 |
Mortgage | -$15,000 |
Current Death Benefit | -$18,000 |
Total Shortfall | $20,600 |
| Annuity Rates | 5.6% |
| Insurance Needed | $365,507 |
And there we have it. I currently have about $365,500 less life insurance than I need to provide for my wife. Doing a similar calculation based on having children in the future, I will need to add an additional $500,000 per child to help with the costs of raising children and the expense of putting them through college.
Now that I know how much insurance I need, I am that much closer to getting it done. My primary stumbling block at the moment is the hope that my current workout regimen will bring my weight down enough so I can get premium pricing. Based on the quotes I have received this coverage comes in at $390 annually for "super preferred," $462 for "preferred," and $882 for "non-tobacco." I think I may just have to bite the bullet and buy it now even if I don't get the "super preferred" price, and then try hard to lower my premiums through a healthier lifestyle.
I'm currently planning several articles on the topic of insurance. I'll update you on my progress with life insurance and cover other topics like disability insurance and maybe a bit about health insurance. Subscribe to my RSS feed to check back later for more posts. Thanks for reading.
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