Do you have life insurance? Do you know how much it will cover? If not, then you’re not alone. Many seniors are unaware of the coverage that their life insurance policy provides or are uninformed about how to calculate what they need. The good news is that there’s no better time than now to take control of your future financial security by understanding which type of life insurance is right for you and your family. With so much at stake, don’t wait any longer!
The Facts About Life Insurance For Seniors
- In 2011, 40% of all households in the United States did not have any life insurance, which means that over 60 million people are not financially protected in the event of death.
- Of those who are insured, many do not know if their policy will adequately protect their loved ones after they’re gone. The 2010 American Council of Life Insurers reports that only 25% of insured households had adequate coverage – meaning that three out of four families are left unprotected by standard policies.
Let’s Take a Closer Look at How This Affects Retired New Yorkers Specifically
If you’re a senior who isn’t sure if your life insurance policy is adequate enough to support your loved ones financially after you die, the solution is simple: calculate what you need.
Here are some guidelines to help you get started:
- One of the most common calculations used in determining how much life insurance coverage is needed is called the “40 times income” rule. According to this popular guideline, it’s recommended that a person should purchase an amount of life insurance that equals 40 to 50 times his or her annual salary. However, this can be misleading for seniors who rely on Social Security and investments for income. For example: If your only source of income is $20,000 per year from Social Security benefits, then purchasing $800,000 worth of life insurance would be excessive – not to mention costly!
- When figuring out the amount of life insurance needed, it’s also important to understand who should benefit from the policy. As a general rule of thumb, spouses are usually the primary beneficiaries while children are secondary ones. However, when we work with families on their estate planning it’s common for a senior to designate his/her revocable living trust as the primary beneficiary, while naming a spouse or other family members as secondary ones.
- Providing for a surviving spouse. Life insurance may provide peace of mind and a financial safety net to a spouse if their partner dies. In addition to funeral expenses, your spouse many need to relocate or make other financial decisions. Often, life insurance is also used to replace income lost when the first spouse passes away.
Not having enough money is often cited as the number one reason why people do not purchase life insurance policies. But the truth is, there are plenty of affordable options available for low-income individuals and retirees who want to provide for a loved one or charity at the time of their passing. If you have questions about how to best coordinate your life insurance with your estate planning, please call Roth Elder Law, PLLC today at (607) 962-6162.