Do I need more life insurance? I am 40 and my partner is disabled. You cannot rely on your current life insurance policy forever.

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Ask your advisor: Do you need additional life insurance? I am 40 years old and my partner is disabled and cannot rely on my current life insurance policy permanently.

Ask your advisor: Do I need additional life insurance? I am 40 and my partner has a disability. You cannot rely on your current life insurance policy forever.

I’m 40 now, and my existing $250,000 20-year term policy expires at 53. I also have about $100,000 in insurance through my employer, which I will lose if I change jobs.

My partner is disabled, unable to work, and has no children or other dependents. The insurance agent quoted her an additional 30 years, $250,000 term insurance, but at 2.5 times his current premium. How do I determine the amount of life insurance I need?

– Randy

You seem to have put this in the correct context. The main purpose of life insurance is to provide for those who are counting on you if you die. In your case, the partner seems to be the main focus.

Ask yourself how much money your partner will need to have the lifestyle they want when you are no longer here.

There are two answers to this question. First, decide what kind of lifestyle you want them to have after your death. Next, estimate how much you can afford to cover that lifestyle. (Consider talking to a financial advisor if you need help choosing life insurance.)

What kind of lifestyle does your partner have?

Ask your advisor: Do you need additional life insurance? I am 40 years old and my partner is disabled and cannot rely on my current life insurance policy permanently.

Ask your advisor: Do I need additional life insurance? I am 40 and my partner has a disability. You cannot rely on your current life insurance policy forever.

You and your partner need to discuss how you’re going to live without you. The plan may involve making major lifestyle changes, such as moving closer to family. Or maybe just a small change is needed, like hiring someone to help clean up from time to time. The point here is to define your partner’s needs before jumping to numbers.

Be sure to consider the adaptations your partner needs when you’re not around. If you bathe your children, go grocery shopping, or handle other basic necessities, think about how they’ll meet those same needs without you. (If you need help starting this conversation, talk to your financial advisor.)

Estimate partner expenses

Once you’ve identified your partner’s needs, you can start calculating your lifestyle costs. Adding up these costs will help determine the amount of life insurance death benefit you need. After all, your life insurance helps support your partner.

If your partner requires additional professional care, please obtain an estimate of the cost of those services. Maybe you want to pay off the house so the other person doesn’t have to worry about it. In that case, please include the remaining mortgage balance in the insurance amount. Don’t forget the burial fee.

Since your partner is unable to work, you will probably need to substitute your income, or at least part of it. We also recommend that you consult with your tax advisor to understand exactly how your partner’s tax situation may change upon your death.

Consider an immediate annuity

An easy way to ensure that your partner’s bills are paid is to price an immediate annuity that provides the necessary cash flow to cover these costs. It’s as easy as getting a quote from your insurance company.

Let’s say your partner needs $3,000 monthly to cover recurring expenses. I need to find out what an immediate annuity that offers $3,000 a month would cost today. You will then receive that amount of life insurance, which your partner can use to purchase an immediate annuity. Please note that annuity payments can change between the time you take out life insurance and the time your living partner takes out life insurance. It should be re-evaluated periodically. (Consider talking to a financial advisor if you need help buying an annuity.)

The need for life insurance declines over time

Ask your advisor: Do you need additional life insurance? I am 40 years old and my partner is disabled and cannot rely on my current life insurance policy permanently.

Ask your advisor: Do I need additional life insurance? I am 40 and my partner has a disability. You cannot rely on your current life insurance policy forever.

Of your two individual policies, $250,000 says coverage stops at age 53 and the other half will be in effect until age 70.

I can’t say if it’s the right amount and timing, but in general life insurance needs should decrease over time for a variety of reasons. There are two main reasons:

  1. As you get older, your partner replaces your income for fewer years. For example, if you live to age 60, your insurance needs to cover 20 years less.

  2. Assuming you are also saving for retirement, your account balance should grow over time. The money could also be used to cover some of the needs of the beneficiaries.

According to estimates received, premiums are expected to continue to rise as one ages. The sooner you get the coverage you need, the better. Life insurance companies are well aware that it is better to insure a 33-year-old than a 40-year-old is better insured than a 60-year-old is better insured than a 40-year-old.

Conclusion

Determining how much life insurance you should buy starts with deciding what your partner will need when you die. These costs can then be aggregated to give you a more accurate picture of how much compensation you need. However, keep in mind that life insurance premiums increase as you get older.

Tips for Finding a Financial Advisor

  • Finding a financial advisor is not difficult. SmartAsset’s free tool will match you with up to 3 vetted financial her advisors serving your area and meet with advisors for free to determine which advisor is right for you can do. If you’re ready to find an advisor to help you reach your financial goals, start now.

  • Consider several advisors before committing to one. Finding someone you trust to manage your money is important. As you consider your options, here are some questions to ask your advisor to help you make the right choice:

CFP®’s Brandon Renfro is a SmartAsset Financial Planning columnist answering readers’ questions about personal finances and taxes. Have a question you want answered? Send an email to AskAnAdvisor@smartasset.com. Your question may be answered in a future column.

Brandon is not a participant in the SmartAdvisor Match platform and was paid for this article.

Photo credits: ©payment.com/sturti, ©payment.com/Luke Chan

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