Life Insurance - help interpreting recommendations

Hi,

I have some questions about the Life Insurance Recommendations. I have read the User Manual and other posts about Life Insurance so I believe that I understand the systems' approach but am still a bit unclear about the recommendations and how to properly interpret it.

In the Report, for 2015 Recommended Amount Life Insurance, the system recommends $650,000 for me in 2015.

Then in Annual Suggestions report, for life insurance, it shows numbers through 2021 although I expect to live much longer past 2021.

With my rounding, it shows 2015 ($650,000), 2016 ($560,000), 2017 ($460,000), 2018 ($355,000), 2019 ($260,000), 2020 ($150,000) and 2021 ($44,000)....then Life Insurance goes to $0 ongoing for many years.

Can you help me interpret this data properly ?

For example, does it mean that according to the system, I only need Life Insurance coverage for 7 years and that each year during that period, I would only need a smaller Face Value from the previous year. Therefore, is the system recommending that after 7 years, even if I lived another 20 or 30 years, that I would NO longer need any life insurance.

Thanks for your help!

Comments

dan royer's picture

That's exactly correct. In each of those years, the survivor would need that much life insurance to bring his or her per-adult living standard to the same level or higher of what it is should the spouse not die. When it goes to $0 it means that the survivor's living standard in those years would be the same or higher than it would be had the person not died. You can see this illustrated if you run a survivor report.

Hi Dan,

Thanks a lot for the fast response. A followup question for you.

I am planning to get a Universal Life Insurance Policy with no lapse with Long Term Care rider until age 100. This costs $6000 a year fixed through age 100 (the premium doesn't change).

To input this properly into the software, I believe that I should put it into Special Expenditures-Expense tab and for "Enter the Amount" put $6000 and select "In Dollars" (NOT use "In TODAY'S DOLLARS").

Is that correct ?

Also, if I'm putting in the Life Insurance expense myself through Special Expenditures, how can I remove the System's automated recommendation of life insurance premiums.

Thanks!

dan royer's picture

Yes, use "dollars" not "today's dollars" since this will get cheaper each year relative to today's dollars. Then, eliminating the system-generated special expenditures is a little trickier. Since you are probably just ignoring the survivor reports, you could set the "change in survivor's living standard" to a negative number until the insurance recommendation goes away. (see the Estate folder). This will mean that your survivor reports won't be as useful, but with the whole life you may not be worried about those or contingency planning anyway.

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