Financial Planning: Be prepared for the worst

Jay Torgerson

Many people prefer not to discuss, or even think about, what would happen to their family's financial security if they passed away unexpectedly. However, most would probably agree that they would be concerned for those they leave behind, and life insurance can be a useful tool in these circumstances. While it may or may not be something that's top of mind, adequate life insurance coverage should be a part of any sensible financial planning for the future. Oftentimes, young people fail to fully appreciate the importance of investing for the future, and many probably don't have reasons to concern themselves with life insurance planning. However, as they get married, and husbands and wives become parents, responsibilities change very quickly and the needs of others begin to come into play.

The main goal of family life insurance is to financially sustain those who depend on your paycheck to support their monetary needs. In the event you can't earn that paycheck anymore, those dependents would probably need to have a way to keep that income coming, should something happen to you. Experts estimate that a family will need approximately 75 percent of the current gross income of the primary wage earner should something happen to that individual and that income is lost.

Deciding how much life insurance coverage you need depends greatly on individual circumstances and family situations, and there really aren't any general rules that apply to everyone. So it's a good idea to evaluate your coverage, and review your insurance needs regularly as well. While everyone's insurance needs will vary, the planning process is much the same for anyone trying to decide on the coverage that is best for them.

The most important step in planning for your needs involves making a list of your current assets. You need to make an inventory of all your belongings you would like to keep, including those you may owe money on. You also need to take into account recurring bills that need to be paid and even personal debts. This list will include items such as the mortgage on your home, your car payment, school tuitions and loans, credit card balances, and so forth.

Once you have completed this list, you will need to figure out how much money will be coming in should you die unexpectedly, to see if you will have enough to meet your family's needs. Keep in mind, some of your assets could be generating income themselves, so they can be listed on the income side of the sheet. Stocks, bonds and CDs are just some examples of investments that can make money for you. Once you have both sides of your list complete, you can see more clearly just how much your family would need in terms of income to maintain your current lifestyle should something happen to you. If the projected income falls short of your family's needs, this is where life insurance can help by making up the difference.

When you have an understanding of the amount of coverage you need, the next important decision to make is what kind of coverage to buy. Life insurance products come in many shapes and sizes, with names like term life, whole life, universal life, and variable life. Once you have decided how much coverage you need, your financial consultant can walk you through the decision process of picking the right kind of insurance plan. Being prepared includes planning ahead for those who depend on you, and now is a good time to make sure their future is secure.

Editor's note: Jay Torgerson is a financial consultant and accredited asset management specialist with AG Edwards & Sons in Salem. Questions and comments can be directed to him by telephone at (800) 553-1023 or by email at

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