Replace the Lost Income
Suzanne wants to know how much life insurance a family needs to protect the surviving family. Dave explains his guidelines.
QUESTION: Suzanne on Facebook wants to know how much life insurance a family needs to protect the surviving family. Dave explains his guidelines.
ANSWER: Roughly 10 times your income. You could do a little more or a little less. If you make $40,000 a year with a family, then you would need at least $400,000. If you had $400,000 in insurance and you died, then your surviving family puts that into a good mutual fund. If you could get it to pay 10% on average, 10% of $400,000 is $40,000. We just replaced your income.
Term life insurance is so inexpensive that I personally would just go ahead and jack it up a little. Another $200,000 is almost nothing for a 32-year-old. It’s not even the cost of a pizza. If you do a little bit of shopping on term life insurance and go to zanderinsurance.com, look at the prices on their website. You’re going to go, “Oh my gosh.”
If for $300 or $400 a year you can cover your family for hundreds of thousands of dollars and you don’t do that, that would make you just plain irresponsible. That’s not a life insurance pitch. That’s just a guy telling you how to live your life right. You’re just irresponsible. You don’t think 32-year-olds die every day? It happens every day. You’ve got a family counting on your income … that’s just plain irresponsible. Literally, $20, $30, $40 a month and you’ve got hundreds of thousands of dollars. It isn’t much money. It’s not like I’m telling you to spend $1,000 a month on something. You’re not. You’ve got to do this.