What is your life worth?


What is your life worth?

09/19/2017 Life Insurance

What is your life worth? Most people would hesitate to put a dollar amount on their existence, but now is as good a time as any to do it. In case you were unaware, September is Life Insurance Awareness Month, a time when insurance industry professionals try to educate the general public about life insurance and attempt to close the gap between the coverage that we need and the coverage that we own. A good place to start, before sitting down to discuss insurance policies or even calling to schedule an appointment with a licensed professional, is to answer the question above. So, what is your life worth?

It’s a morbid question to be sure, but to answer it in a productive manner, you have to understand what it’s really asking. The question isn’t aimed at your intrinsic value as a human being. It’s an attempt to objectively put a dollar amount on all the things you do for your loved ones. No matter your personal situation, whether you’re married with children, a single parent, or just single with no family attachments, we all leave a financial footprint on this world, and we all have an obligation to make sure that footprint can be filled in the event that we are suddenly no longer able to fulfill it ourselves. No one can follow you and be the father, mother, sister, brother, uncle, aunt, daughter, son, or friend that you are. Life insurance is not about replacing people. It is about replacing their financial value. And value goes far beyond your annual income.

There are several ways to assess your value, ranging from broad and general to narrow and specific. A good rule of thumb when deciding how to calculate your value is to start by counting the number of people who have a financial stake in your life. The higher that number, the more detailed you should be in your calculations. If you’re single with no dependents and few outstanding financial obligations, you can be as vague about your financial value as you like. You just want to make sure that you purchase enough life insurance to cover your financial obligations (unsecured debt, student loans, etc.) and pay for the costs of your funeral service. The decision to add extra coverage that could be paid to a parent, friend, or charitable cause is entirely discretionary.

If, on the other hand, you’re married with three young children and an ailing parent who relies on your family for support, then you need to get down into the nitty-gritty fine print of what it would cost for your loved ones to continue their lives without you. Start with your outstanding obligations (debt, mortgage, auto loans, etc.). Add your annual income, multiplied by the number of years you want to provide that income to your survivors. Do you want to leave enough for your family to receive your annual income until all the children are out of high school? Out of college? Until the family home is paid off? If you’re a two-parent household, you need to insure both parents because they both have a value. Whether both work full-time or one manages the household full-time, the services each spouse provides contribute to the operation of the household and would have a cost for replacement in the event of a death.

How much would it cost annually to replace a stay-at-home dad or mom with child care so the survivor could continue working? If the parent who does most of the cooking were to die, would the survivor be able to take up the slack or would the family dine out more frequently? Would the survivor be able to keep up with the daily chores and responsibilities of a deceased partner or would hired-help be necessary? Add in the estimated cost of education for your children if you plan to send them to college without their taking on student loan debt. Don’t forget the estimated costs of burial and funeral services. After you’ve added all that up, you get to subtract assets. To give yourself a fair estimate of what it would cost to maintain your current lifestyle, stick to liquid assets like savings and existing life insurance coverage. There’s no point including your home equity in the equation if you’re planning for your family to keep living in the home. The figure you’re left with is your financial value, and it’s the amount you should keep in mind when shopping for life insurance.

It takes some time and effort to come up with this number, and it’s not a solo exercise. You’ll need to talk it over with your spouse or whoever will be named the beneficiary of your life insurance policy to ensure that your wishes and expectations match up with theirs. But once this chore is done, and you know your value, you’ll be able to move much more confidently toward the next step in covering your financial footprint.

No idea where to start? Request to meet with a licensed GPM Life representative in your area who can help you find your value and make sure it’s insured.


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