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Duhon: Planting trees you will never see

There is an old Greek proverb that says, “A society grows great when old men plant trees whose shade they shall never sit in.”

What a beautiful metaphor!  It applies not just to the greater good of society, but personal finance as well.   When you focus on leaving any form of legacy behind – whether that be your family, friends or specific organizations – life insurance is the most efficient vehicle for transferring wealth once your time here has passed.

But how do you choose?  How much do you need and what type of life insurance is right for you?  Here are some basic things to know before purchasing life insurance.

  • The amount of coverage – Focus on your income and your debts. Your family lives off your income now don’t they?  Multiply your income by the number of years remaining until you retire.  For example, if a 45 year old makes $50,000, then a reasonable start would be $750,000 (15 years x $50,000) in life insurance.  Also consider any debts you have.  Your mortgage balance should certainly be considered if you have dependents.
  • Term, Universal, Whole – Rather than getting into the underpinnings of how different forms of life insurance are structured, I want you to at least understand that there is term life insurance which covers a specific length of time (10,20, 30 years) as well as permanent life insurance. Term is usually much more affordable and can efficiently insure you for a length of time – maybe until the kids are grown or until the house is paid off.  Permanent insurance does not expire and often locks in a premium amount that will not change.  The insurance doesn’t expire either so if the plan is to make sure money is being left behind regardless of how old you are when you die, whole or universal policies may be right for you.
  • “I have life insurance at work” – This is a tricky concept. Many employers do provide very affordable life insurance coverage and there is nothing wrong with that.  If you only have life insurance through work however, are you so sure that you will be employed by that company when you die?  What if you get laid off and die before you were able to purchase more insurance?  What if you leave that job and find out you are uninsurable?  Consider complimenting employer provided life insurance to avoid these potential pitfalls.

As with everything in finance, there are so many more details to consider. Consult with your financial professional before purchasing to make sure what you are buying fits your precise needs.

For further information, contact Jesse Duhonwith Schexnayder Wealth Management at 985-652-2877 or email him at jesse@schexwealth.com.