New York Life recommends that
you review your life insurance once a year. Think of it as a checkup ...
preventive medicine to help maintain your family's financial security.
The reason: needs change over time, sometimes more rapidly than people
realize.
Fortunately, this review process needn't be all that complicated or elaborate.
To get a rough idea of how well your present coverage meets your own needs,
take about two minutes now to complete the following self-review.
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| Two Minute Review Checklist |
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Check all that apply:
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My current life insurance program is less than six times my annual income.
According to the American Council of Life Insurance, this is the least
amount of life insurance you should own. So, if your income is $40,000
a year, you need at least $240,000 of coverage.
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My annual income has increased by 10 percent or more since I last updated
my coverage.
A key purpose of life insurance is to replace lost income. If your current
coverage is not in line with your needs, you could be exposing your family
to risk.
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I have had a change in family status.
The birth of a child, death of a family member, marriage, divorce, or
a child leaving home. These events often indicate the need to adjust —
whether to increase or decrease — your life insurance coverage.
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My spouse or I recently resumed or discontinued work.
Such changes create shifts in income and the need to review your plans.
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In the event of my death, my family would have an immediate cash flow
problem.
One of the purposes of life insurance is to provide cash to help your
family at the exact moment when it is needed most.
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In the event of my death, my family would have difficulty maintaining
their current standard of living.
Another purpose of life insurance is to provide sufficient funds to help enable
your family to stay in the family home and continue their present lifestyle.
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How much life insurance do you currently have?
$100,000 of coverage? $200,000? How about $400,000? That may seem
like a lot, and it certainly is a good start. However, consider
that it is your income stream, not your net worth, that provides
the best measure of your family's standard of living. If you couldn't
earn a living — if you should die or become disabled —
how much money would it take to replace your income stream? Though
the precise answer depends on interest rates and withdrawal amounts,
you might be surprised at how much money would be needed.
For example, it takes $500,000 to provide your family with an
income stream of $40,000 a year for a 20-year period, after which
the entire amount is depleted.1
Similarly, one million dollars generates $80,000 a year, once
again with the entire amount consumed in 20 years.
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In the event of my death, my children's educational goals
would be put in jeopardy.
According to the 2002-2003 College Board numbers, a college education currently averages almost $10,000 a year at a four-year public college, and over $25,000 a year at a four-year private school. Looking at the Ivy League? Four years of tuition, fees, and room and board now costs over $135,000 at elite schools like Harvard and Yale.
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We really haven't taken serious steps to build up a retirement income
fund to supplement Social Security and our employer-sponsored
pensions.
If you're already in your 40s or your 50s, you need to start planning
and soon.
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We've been too busy to develop a plan mapping out how our estate should
be distributed.
Estate planning goes beyond updating wills. With professional planning, you can make sure your heirs get the estate you build.
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Feel free to print out this worksheet to use with an agent at a later time. Or, if you'd like us to have an agent contact you, request an annual review with an agent.
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1 For illustration purposes only: Based on the assumption
that the principal (starting amount) earns 5% after taxes in today's
dollars, with principal interest to be depleted after 20 years by withdrawing
an amount equal to 8% of the original principal each year.
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