Life Insurance – Part 3 – How Much Life Insurance Do I Need? (Part 2)

• Posted by: IRON100, March 14th, 2010 at 12:16 am
• Comments: 0

As promised, I stated that I would deal with the topic of government benefits before I wrapped up this series on life insurance. Well, here goes.

Because of some rather strange (and also quite bitter) circumstances, I got the shaft with regard to college scholarship money when I was in high school.  Adding to that fact, my father died while I was in college, and I worked while at college anyway (I was a cooperative student). It was not an altogether happy time for me, but I got through it and pressed on.

At that time, I needed some assistance, and not the least of it was provided by the Social Security Administration. Putting my personal politics aside, since many of you (if not ALL of you, with the exception of a few businesses or local governments around the U.S.A.) have contributed to Social Security all of your working life, I think those benefits should accrue to you if you need them. What is not fully understood by many Americans is that there are some minor but not unsubstantial benefits for survivors of YOUR death. For many of you, it may be the only chance to take advantage of them before Social Security goes bankrupt.

To find where a summary of survivor benefits are, click on this link from the Social Security Administration. There are basically four kinds of survivor benefits provided. They are:

1) A death benefit (that is virtually a nonsequitur, at $255)

2) Survivor benefits for spouse, which is set at $1000 a month, but which is scaled back based on the age lower than 65 that those benefits are received.

3) Benefits for minor children (under 18)

4) Benefits for college age children up to age 22.

How does one know what his or her survivor benefits are? Many of them are noted on the annual letter one gets from the Social Security Administration each year. However, to really know what they are at the time of death, one must apply for them at the Social Security Administration website located at the link above. One can, however, take a first cut at the amount of benefits one might receive using this calculator, provided by the Social Security Administration.

There are numerous factors that will determine how much of a benefit can be received. Those factors can include remarriage, in which case, one might lose all benefits for the spouse who remarries.  One needs to consider such factors when calculating the net benefit that would not need to be covered by purchased life insurance. There are even benefits for divorced spouses under certain circumstances. The important point to remember is that you should contact the Social Security Administration upon the death of a spouse to determine exactly for what amount of benefits the surviving spouse and his or her children may qualify.

What is most important to know is that these benefits can be obtained by virtually anyone who has paid into Social Security. It is a benefit that taxpayers often ignore or do not consider as a source of funds.  As stated previously, one should not "look a gift horse in the mouth" when it comes to benefits that you have paid into the system.

I am going to stop right here for now. The next installment should allow me to tie all the pieces together to determine the overall total life insurance need.  I may also have to cover the concept of level term versus declining and balanced term insurance. Needs will vary (and hopefully decrease) as one ages and builds wealth. There are several ways to handle those issues.

Tickers: children's benefits. benefits for children in college., life insurance, Social Security Administration, survivor benefits