There are some easy calculations you can do to determine the face amount of the insurance you may need to buy. It is a good idea to do this calcula-tion before retirement for several reasons.
1.If you are working, you may be able to pay higher premiums whileyou have a paycheck and then scale down the premiums after youretire. There are insurance policies, such as universal life, that allowfor great flexibility in when and how much you pay in premiums.Paying more now hurts less than paying more later.
2.You may be able to buy insurance at a group rate and then convert it to an individual policy at the same rate once you leave your job. Or you may have an individual policy aside from work that can be used to develop future income. You may want to add more face amount of coverage without canceling the old policy.
3.Because you are younger than you will be tomorrow, you may not get a better rating if you wait several years to buy additional coverage.
With a little imagination and planning, you may significantly improve your financial outlook. For example, one can replace income lost due to early death using life insurance proceeds. Let’s suppose Barbara, Joe’s spouse, wants to buy an insurance policy on her husband’s life so that she could replace $656 in monthly income if he passes away at age sixty-four (or older). Without the extra Social Security check, Barbara would not feel secure. Suppose Joe does pass on soon after he reaches sixty-four, when Barbara is sixty-five. The $656 per month equals $7,872 per year that will be sorely missed. At today’s annuity rate, Barbara could get $656 per month for life by buying a $100,000 life insurance policy now and converting it to an annuity income at Joe’s death.
