Life Insurance First Questions – Rule of Thumb
Your life insurance should cover 10X your annual family income
If your annual household income is $100,000, that means you need $1 million death benefit.
If your annual household income is $50,000 that means you need $500,000 death benefit.
Life Insurance Questions – Second Rule of Thumb
Don’t tell your beneficiary.
Because if they know they can make money on your death, they might put a hit out on you.
Make it a little surprise for when you’re gone.
Some Life Insurance Questions & Considerations
Here are some factors to consider:
- Income/Current Financial Situation
- Role in your business
These are the things that you’ll consider when you are thinking about how much money to leave your loved ones with.
If you’re in business, you need to figure out how much money you need to leave your partners with before you die.
For example, if you’re a cofounder of a business, then you play a pretty important role, and if you up and die then that is pretty damaging to the company. Your death benefit will help keep the company rolling.
Age, health, debt all come into play.
For example, if you and your wife had a mortgage together, that mortgage isn’t going to go away simply because you’re dead. Your spouse is going to have to carry that debt.
Kids are another thing to consider. You have costs for education and for food. The projected cost of raising a child from birth to 18 is around $200,000 to $250,000 in North America. No small number.
Here’s a video you want to make sure to watch:
Some Life Insurance Questions To Ask With Your Financial Advisor
- What are your short & long term debts, loans, and goals?
- How much is your mortgage / rent?
- Kids? Got any? How old? And how much of their education do you need to cover?
- Do you have money to cover your own funeral costs?
Personally, I think kids these days get too much coddling. It will be better to let them figure it out by themselves like how all of us figured it out by ourselves. You have to be stimulated into action somehow.
I remember for my grandparents, everybody just had to pitch in for the expenses because as immigrants, they didn’t amass many assets. So, they lived life poor because they didn’t have much financial education.
And the world has not changed much looking at our ballooning debt when it comes to financial education.
But my grandparents lived in a different time. They lived in a time where they had no Internet or no Youtube, where they could easily learn things.
Financial education was not a common service that could be provided easily, much less for free. Thus, we should be grateful that we get to have such luxuries.
I just want you to know that you’re being really responsible right now for taking the time to learn about personal finance. You could do anything else right now, but you’re here, reading this blog and learning about personal finance.
And when it comes to personal finance, it’s really just asking the right questions.
Last question I want you to ask is “Do I have enough money to cover my own funeral costs?” because I really think it’s irresponsible to push your funeral costs over to the people you care about.
You don’t want your loved ones to be thinking “Why did they have to die and leave me with the cost of their funeral?”
That’s all for today.
Don’t forget to checkout my book over at bit.ly/leverage-ebook.