What does $500,000 in life insurance buy?

You have given it some thought and decided to purchase a term life insurance policy. You want to provide a financial safety net for your family should you die in you prime earning years when they need your income most. That’s good!

A half million dollars is a lot of money, especially all at once. The primary purpose of life insurance is to replace income.

You are not going to work after you die, or at least in my version of heaven, you don’t. Your life insurance should be put to “work” to earn an income for your family. That means investing it.

If you can invest this $500k and earn 5% interest that would generate $25,000 in taxable income.

You might be thinking, “I make more than $25,000 per year, do I need more life insurance?” I would tell you something is better than nothing when it comes to life insurance. I too often talk with people who look at the total amount of life insurance they have, but don’t consider how long it would provide an income for their family.

Here are some of the questions you need to consider. How much life insurance do you have? Do you have enough to replace all or at least a large part of your income should something unexpected cause your death? Your family will need your life insurance to generate an income that you are not here to provide.

The point I’m making is don’t look at the amount of life insurance you have, look at the investment potential it will give your family to help them replace your income.

The information contained in this page is provided for general informational purposes only. The information is not meant as professional or expert advice, and any reliance you place on such information is therefore strictly at your own risk.

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