If you tell a lie often enough, people will come to believe it. Heck, you might even come to believe it.
There's a lie or supposed "rule of thumb" in the Life Insurance industry that persists and I hear it repeated often by both agents and clients. Prominent advisors repeat it daily on podcasts, blogs, and radio shows. The thing that confuses me is that it isn't a lie that gives anyone any sort of advantage.
What is the lie? This: The amount of insurance you should have should be 6 to 10 times your annual income.
Have you heard that before? Let's take a look at what that would look like in real life...
According to the Federal Reserves' latest numbers, the average American household debt is a whopping $52,500. Yet the average American household income is $59,039. We're living well beyond our means.
According to the myth the average American should have somewhere between $354,234 and $590,390 in life insurance coverage.
This seems like plenty even on the low end. $354,234 - $52,500 = $301,734. But is it enough. Not if you have an average household mortgage of around $182,421. After paying off all debts and wiping the slate clean you are left with $119,313 or about 2 years of annual income. I don't know about you but I don't want to leave my family with only 2 years of income!
So, what if you didn't pay everything off (not advisable) with the life insurance benefit but slowly whittled away at the proceeds - withdrawing the annual income each year? The account would last, well, roughly 6 to 10 years, probably more if the surviving spouse can continue to work.
That sounds pretty doable but consider what else isn't factored into the equation:
Final/Medical Expenses $15,000 average
Income replacement while children are still at home (0-20 years)
Children's Education ($36,000 - $120,000) per child.
Childcare for one child while the surviving spouse is working ($15,888 Ohio)
Retirement planning for a spouse.
The point is that 6 to 10 times your annual salary can be a good place to start and something is better than nothing. But this type of plan isn't optimal. An even better approach is to sit down with a trusted agent who will help you asses your goals and plans for your family. Your agent can help you examine your specific situation and help you see areas of weakness you might not have considered.
So how much life insurance coverage do you need? This calculator is a good place to start. Run your own numbers and then give your agent a call. Give me a call for a free, no-obligation assessment and/or quote and let's start a conversation about insuring your love...
740-324-0702
hahnjamesm@gmail.com
Skype - hahnjamesm
Social Media #JHAHNCOF
Learn More: I highly recommend this book!
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