Many households nowadays require two incomes to cover their basic expenses. You should have enough money left over to put in an emergency fund and save for things like retirement and tuition. But what if your family lost their paycheck tomorrow? Would your household be able to pay the bills if that source of money was no longer available?
One of your most valuable financial assets is your income. Would your family and loved ones be able to live comfortably if you were to disappear tomorrow? Life insurance can offer you and your loved ones peace of mind by replacing your income. The costs of mortgages, auto payments, utilities, groceries, and gas appear to rise year after year — with income replacement through a life insurance policy, your family can be better prepared for the increase in the cost of living.
Why Should I Invest In Life Insurance To Replace My Income?
Consider all the ways you spend your money: car payments, house payments, food, insurance, new clothes, credit cards, and so on. Would your family be able to handle all of these costs if your income disappeared from their budget? One of the main reasons many individuals buy life insurance is to replace their income, especially if they have loved ones who rely on them financially. If you have life insurance for income replacement, your family will have the financial support they need to continue living the way they are accustomed to.
Is My Employer-Provided Life Insurance Enough?
You might already have life insurance via your employer, but is it sufficient? Employer-provided life insurance may or may not provide the amount of coverage you require, depending on your unique employer’s offerings.
Assume your employer provides you with free coverage ranging from $50,000 to $100,000. This may appear to be a large sum of money, but if you have a family to support, you may require considerably more to replace your salary (depending on how long you want your income replaced). Even if some employers charge more for supplemental life insurance, you’re still getting your life insurance from a single source.
This can be a problem if you lose or quit your work because your coverage may not follow you. That’s why, even if you have access to life insurance through your employer, you should consider purchasing and owning a policy that will follow you wherever you go.
What Kind Of Life Insurance Do I Need To Replace My Income?
So, how much life insurance do you need to replace your earnings? To generate an estimate, multiply your annual income by the number of years you wish to replace it for. Five to ten times one’s annual income is a common choice. Keep in mind that persons with older dependents may not require as much income replacement as those with younger dependents.
Remember, this is simply a starting point to help you figure out how much money you’ll need to replace your income; it doesn’t account for factors like final expenses, overall debt, or saving for your children’s college tuition. Your Matador Insurance agent can assist you in selecting life insurance coverage that is tailored to your personal needs and those of your family. Please reach out to us online with any questions or concerns regarding life insurance policies and income replacement options for your family’s future, or request a consultation today.