Covering Your Bases with Life Insurance

The 21st century brought more than a new millennium to experience. Over the last two decades, inflation has continually outpaced wages and income and this trend shows no sign of slowing. This inverse relationship between wages and costs means that you need more dollars each year to purchase the same items as you did the previous year. Financial and estate plans are not impervious to the pressures of inflation. Here are three aspects of your financial plan that you should consider adjusting:

1) Spousal income replacement

With the advent of telecommuting, dual income households seem to be taking over the landscape. For some, higher levels of household income have permitted better lifestyles. For others, two incomes barely get the bills paid. If your budget and lifestyle are dependent on two incomes, you should review your life insurance coverage and make sure that both wage earners are insured. You, your spouse, and your family may be in financial jeopardy if your insurance plan has not been recently updated.

2) Purchasing a new home and taking out a mortgage

Today, many homes are purchased with the help of a substantial mortgage. If you or your spouse suffered an untimely death, would your current life insurance be enough to pay off the balance of your mortgage? It's important to make sure your life insurance policy's death benefit provides the necessary funds to accomplish your goals--protecting your family's lifestyle.

3) College education costs

If you have college education plans for your children, you may be concerned about the rising costs of higher education. In 1977, the annual cost at Harvard University was $7,060. Thirty years later, you would have to pay $32,556-an increase of more than 350 percent (Figures from Forbes, Nov. 1, 1977, compared to the Harvard Admissions Office, 2008-2009 academic year). Putting money aside for your child's education requires a long-term financial commitment and a disciplined approach to saving. However, it also requires a contingency plan in the event of an untimely death. For this reason, you may want to include all or part of the projected education costs in your insurance plan.

Life insurance planning doesn't end with these three scenarios. In fact, you may have additional goals you want to hedge against in the event you or your spouse suffers an untimely death. Adjust your life insurance coverage for inflation to ensure your wishes will be fulfilled in the future.