Inflation has increased fiscal costs for most Americans, which must be considered when evaluating life insurance blanket.
Being underinsured means that loved ones would not be able to cover expenses resulting in debt or perhaps the loss of the family home.
“Life insurance helps provide resources to cover in the event of an untimely death…to care for and support the family,” Sandi Bragar, chief client officer and partner at Aspiriant, told Yahoo Finance Live (video above). “In this environment of rising inflation, these costs have become much higher and because there is a void, we are filling it with life insurance.”
The rule of thumb is to have 10 times your annual income in life insurance, according to the insurance nonprofit life happensto cover non-funeral expenses like housing, mortgage, child care, health care and education, so your family doesn’t go into debt.
As the costs of food, gas and housing have increased, consumers need to assess their life insurance coverage to ensure it is adequate, which is why while 10 times your salary is recommended, your coverage amount should increase with the cost of living.
Some financial planners recommend a combination of term life insurance and permanent life insurance policies. Since term life insurance expires, a permanent life insurance policy provides lifetime coverage and gains cash value that can be used during the policyholder’s lifetime in the form of a loan or withdrawal.
More Americans are operate their permanent life insurance policies to help them weather inflation and avoid dipping into retirement accounts battered by stock market volatility this year.
“You want to look at all the different types of policies that are out there and find the one that best suits your needs,” Bragar said. “One thing we like to do with our clients is stack life insurance policies. This allows the client to reduce the overall cost of this life insurance package, but meet their projected funding needs for their survivors in the event of an untimely event, [if] an untimely death was bound to occur.
“For example, if a client needs $1.5 million insurance, rather than buying a $1.5 million policy,” Bragar said, “we buy three $500,000 policies. , maybe with different conditions”.
Ronda is a senior personal finance reporter for Yahoo Money and an attorney with experience in law, insurance, education and government. Follow her on Twitter @writesronda
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