I talked with a young couple yesterday. They are in their 30s, have two kids, and are looking for life insurance on both spouses. They had reviewed their finances with their financial planner who’d recommended they purchase a life insurance for both them to augment their financial plan.
The wife and I reviewed what they currently have and what they want to accomplish with these policies. To help frame our discussion, I outlined the three questions I believe anyone should answer when contemplating life insurance (see https://wiseinsurancegroup.com/shopping-for-life-insurance-answer-3-questions-first/):
- What do you want the money to do
- How much will it take to do that
- What do you want to spend
The main thing she and her husband want to do is to make sure if anything happens to either of them, the surviving spouse will be able to raise their children without a financial strain. The criteria she identified is:
- Provide for childcare if she were to die first
- Replace her husband’s lost income if he were to die first
Providing for childcare helps make it easier for her husband if he is raising their kids alone. It may include daycare for their youngest child and after school care for their oldest child. In addition, replacing her husband’s lost income if he dies first allows her to stay in their home and continue to raise their children without her having to return to work immediately.
To confirm I completely understood their goals, I asked her to clarify if their criteria encompassed paying off the mortgage, providing a college education for their kids, or something else that had not been mentioned. They haven’t answered these questions completely, so I suggested she and her husband discuss them and think about timelines.
One of the factors in answering the second question is determining how long the money needs to last. If the husband only needs to cover childcare, or the wife wants to replace her husband’s lost income, then they need to determine how long they need the money to be available to accomplish these goals. The timeline then enables them to determine the amount of money needed for both of them.
I also suggested they discuss what type of funeral arrangements each of them wants. No one wants to think about dying, however, this is something every couple should discuss. Knowing whether they want to be buried or cremated and what kind of service they want helps the surviving spouse make decisions more easily in a time of emotional stress.
I then asked if they had determined a budget for life insurance. In their case, they have not determined how much they’d like to spend yet. However, based on our discussion, I will be able to provide the wife and husband with some preliminary quotes will help them determine what fits within their budget. These quotes will include both term and permanent options since they are still working through how long they want the policies to be active.
If you’re beginning to evaluate your life insurance options, take the time to answer the three questions this couple is answering. If you need help with this, let me know. Share your questions, comments, suggestions, and experiences with me on my Google +, Facebook, or LinkedIn pages. I’d love to hear from you!