How Much Life Insurance Do My Partner and I Need?
Same-sex couples need to look at life insurance even more so than their heterosexual counterparts. With so many unknowns when it comes to the legal ramifications of civil unions and domestic partnerships, life insurance should be an integral part of every same-sex couple’s financial planning process. Life insurance should not be treated as a one-size-fits-all purchase, though. In fact, there’s a good chance that one partner may require more coverage than another. If you aren’t sure how much you and your partner need, begin your planning by taking a look at our life insurance needs analysis.
Life Insurance Needs Analysis
While there are many different ways to assess your life insurance needs, the basic evaluation starts with L-I-F-E:
L = Loans
What is in your name that will need to be paid off upon your death? Most loans and credit accounts will not simply disappear after you die. Ensure you leave your partner debt free by taking every loan into account. Note: Some student loans may need to be included in this category, so check the terms of your loans if you have any education debt.
I = Income
This category is often misrepresented or completely ignored – often to the detriment of surviving family members. Even if you pay off every debt, including your home, under “L” above, what will you do to pay those bills that will never go away? Property taxes, insurance, electricity, water, HOA dues, and other monthly living expenses won’t disappear with your debt. If you don’t want to change your lifestyle, factor in enough income replacement to maintain it.
The number of years you will want to multiply by depends on your situation. If you are the primary earner, you may want to ensure your children are out of the house and your partner has enough time to replace your lost income. Even if you don’t work, you still have value. Consider covering expenses like childcare or housekeeping in your insurance policy.
F = Final Expenses
Final expenses typically cover funeral and burial costs, which can vary wildly based on your religion or culture. If you would like to have an average funeral and burial in the United States, factor in anywhere from $15,000 to $50,000 in this category, just to be safe.E = Education
If you and your partner have children and haven’t already covered their expenses for higher education, it’s a good idea to build this into your life insurance amount. If you have already planned for these costs, then you can change the “E” to “Entertainment.” It may sound strange, but some people find that they would like to travel upon a terminal diagnosis. If a death is sudden, a trip can also be used to remember a loved one and celebrate his or her life.
Adding Up the Numbers
You may be surprised to find a number that equals over $1-2M after a simplified needs analysis. Don’t fret! There are many ways to cover the amount you need without breaking the bank. Life insurance comes in many forms and has many options. As part of our financial-planning process, we can help you determine what policies will work best for you and your partner based on your budget, health, and needs.
As Benjamin Franklin said, “… in this world nothing can be said to be certain, except death and taxes.”
The opinions voiced in this material are for informational purposes only and are not intended to provide specific advice to any individual. We are not property and casualty insurance agents and this should not be considered insurance advice. We suggest that you discuss your specific situation with a licensed and qualified property and casualty insurance professional.
As a Registered Investment Advisor (RIA), Partnership Wealth Management is committed to providing our clients with financial planning and wealth management services to help them make the most of their investments. At Partnership Wealth Management, we have a long history of working with the LGBT community. Among the many services we offer are financial planning and estate planning strategies for gay and lesbian couples. Financial planning is an important part of preparing for the future; contact us today to get started: www.partnershipwm.com.