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Last week we met with our insurance guy to see about getting quotes on life insurance policies.
We already have term life insurance to cover the mortgage and a bit extra should either one of us die.
Now that we're parents we're looking at increasing our coverage to cover some additional expenses.
We can't increase our policies; we have to get new ones to make up the difference. We're looking at our current insurance company as well as competitors to see if we're getting a fair rate.
Looking at What We'd Like Covered By the Insurance
The rule of thumb for life insurance is to get a policy that is 8-10x your annual income.
While I appreciate having some guidelines, I think we have to consider our own family's particular needs.
First off, we want to make sure our final expenses are covered. We're going to use the estimates of $15,000 for funeral expenses.
When my grandmother passed away she had enough set aside to take care of her funeral costs, which was extremely helpful for the rest of the family (too bad the insurance company dragged their feet).
Both us would like to have the remaining debts paid off. We'd also like to leave some money for our daughter (and a bit for her legal guardians should both of us pass away).
We don't need to leave a massive amount of money – we're not looking to create a big income stream.
Buying too much life insurance is expensive and isn't our goal – becoming self-insured at some point is a goal though. How much money would you or your spouse need to live with no worries but the grief of losing the loved one?
I hate to make it seem that you can estimate your spouse's grieving period – you simply can't know. I'm just mentioning that you should factor in a grieving period. Between planning the funeral and getting everything financially squared away, it take quite a bit of time.
If all the debts are paid off, that will lower monthly expenses considerably and it will be less of a burden on the surviving spouse and our baby girl.
Thoughts on Life Insurance
To be honest, looking at life insurance is kind of depressing. I know it's necessary, but I will be so happy when we get the policies done.
This topic is definitely something I'd like to get some other perspectives on.
How did you calculate how much life insurance coverage your family needed?