Do You Have Enough Life Insurance?

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Do You Have Enough Life Insurance?

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Your Worthless Baseball Cards

April 14, 2011

Here is the scenario. Your husband is driving home that night on the local highway. Out of nowhere a large truck sideswipes the car sending it reeling off the road. After the car does a couple of flips and comes to a rest, emergency vehicles arrive on the scene only to realize that they are too late. Your husband is pronounced dead on arrival.

As the chaos unveils, it is learned that the driver of the truck was heavily under the influence of alcohol at the time. He lost control of the truck driving at an excessive speed when he inadvertently hit your husband's car sending him to an early death. As you learn more facts about the case, you decide that there is only one option. That is to file a lawsuit against the trucking company. The big question then becomes . . . what amount do you sue for in court?

Many times in the financial planning process when I ask this question the answer is substantially more than the life insurance the family has on the life of the husband. While a million dollars seems like a lot of money, we generally find that people would sue for several million dollars in a tragedy like this.

In insurance planning, this loss is considered to be someone's Human Life Value. Essentially, if your spouse or partner earns $200,000 per year in this calendar year you would have to first look at how many years would they have the ability to earn that income. For example, if a 40 year old was earning $200,000 per year, it would be 4 million total dollars (without inflation) over the next twenty years. What you have to figure out next, is what the net present value of $4 million dollars would be in today's money. In non financial terms, this really means how much money would your spouse need on a debit card in today's money to generate that $200,000 per year for the next twenty years? The answer to that question is one way to solve how much life insurance you may need.

My guess is if you run the numbers, you probably don't have enough life insurance. To date, I have never met a surviving spouse who said that they had too much life insurance. I have seen plenty who wish they would have bought more underestimating debts, college education expenses, or their ability to earn additional income to pay bills. Hopefully, a situation like I described never happens to you. Ask yourself this question tonight . . . What is the value of my spouse's life?

Ted Jenkin, CFP®, AAMS®, AWMA®, CRPC®, CMFC®, CRPS®
Co-CEO and Founder oXYGen Financial, Inc

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Securities and Investment Advisory Services offered through NFP Advisor Services, LLC (NFPAS), Member FINRA/SIPC. Oxygen Financial is not affiliated with NFPAS. NFPAS does not provide tax or legal advice. This site is published for residents of the United States only. Registered Representatives and Investment Advisor Representatives of NFP Advisor Services, LLC (NFPAS) may only conduct business with residents of the states and jurisdictions in which they are properly registered. Therefore, a response to a request for information may be delayed. Not all products and services referenced on this site are available in every state and through every representative or advisor listed. For additional information, please contact NFPAS Compliance Department at 512-697-6000. PLEASE NOTE: The information being provided is strictly as a courtesy. When you link to any of the web sites provided here, you are leaving this web site. NFP Advisor Services, LLC makes no representation as to the completeness or accuracy of information provided at these web sites. Nor is NFP Advisor Services, LLC liable for any direct or indirect technical or system issues or any consequences arising out of your access to or your use of third-party technologies, web sites, information and programs made available through this web site. When you access one of these web sites, you are leaving our web site and assume total responsibility and risk for your use of the web sites you are linking to.

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Securities offered through Kestra Investment Services, LLC (Kestra IS), member FINRA/SIPC. Investment advisory services offered through Kestra Advisory Services, LLC (Kestra AS), an affiliate of Kestra IS. oXYGen Financial is not affiliated with Kestra IS or Kestra AS. Kestra IS and Kestra AS do not provide tax or legal advice.

This site is published for residents of the United States only. Registered Representatives of Kestra IS and Investment Advisor Representatives of Kestra AS may only conduct business with residents of the states and jurisdictions in which they are properly registered. Therefore, a response to a request for information may be delayed. Not all products and services referenced on this site are available in every state and through every representative or advisor listed. For additional information, please contact Kestra IS Compliance Department at 844-553-7872.

PLEASE NOTE: The information being provided is strictly as a courtesy. When you link to any of the web sites provided here, you are leaving this web site. Kestra IS and Kestra AS makes no representation as to the completeness or accuracy of information provided at these web sites. Nor is Kestra IS and Kestra AS liable for any direct or indirect technical or system issues or any consequences arising out of your access to or your use of third-party technologies, web sites, information and programs made available through this web site. When you access one of these web sites, you are leaving our web site and assume total responsibility and risk for your use of the web sites you are linking to.