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Buying Life Insurance
Where to Start and What to Look For
By Katherine Bontrager
1. One parent dies.
2. Other parent dies.
3. Both parents die.
"How much will it cost to support the survivors at the desired standard of living until they become self-supporting?" Graves says. "Include future inflation in the estimates. What assets are already in place to help support the survivors, including savings, investments, employer-proved insurance and so on? Any shortfall between desired support costs and currently available sources of funds can be provided with new life insurance."
Parents also need to take into consideration how long they'd wish to support their children, Graves says. Just until they complete high school? Undergraduate degree? Graduate degree? Until the living spouse remarries or also passes?
"Parents need to assume what type of schools will be attended and find out what the current costs of those schools are," Graves says. "High schools for children with learning disorders can cost as much as $27,000 per year. Private prep school can cost over $20,000 annually. Tuition charges at Ivy League schools run over $40,000 per year; public colleges and universities have tuition charges ranging from less than $10,000 to more than $25,000 yearly."
Taking into account all these potential costs will help determine how much life insurance is needed for both parents. Online calculators and insurance agents can help you determine this total, though many industry experts advise you to have 10 to 20 times your annual income in coverage. Butalso keep in mind whether your budget can support the premium costs of the coverage you think you need.
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