Life Insurance Alaska AK
Reader’s Question:
I live in Alaska and I have a neighbor who just passed away. Apparently, he spent so much on his insurance compared to his actual needs and income considering he does not have any dependents. Is there such thing as to OVERINSURE? What is the rule of thumb in investing for insurance? Please explain.
Kimberly
Anchorage, AK
Yes. There is such thing as to “overinsure” which can cause a great deal of money wasted in the event of premature death, and has more direct impact on the paying policy holder. There is also such thing as to “underinsure” which will have a direct impact on the surviving spouse and dependents. In the event of the premature death of a policy holder who happens to have purchased insurance policy that is “too low”, the family might be forced to lower lifestyle at an already traumatic stage in life, the surviving wife might have to go back to work, the college student might have to drop out, or worse, the house might have to be sold to a very bad market.
Figuring out the right amount for insurance coverage is a tricky math work to do and requires experts. The rule of thumb is to cover 10 times the annual salary, depending on various circumstances. The goal is to withdraw less annually from your income than what your policy can return.
Try to check out insurance calculators over the internet to give you and idea on how to calculate your needs in Alaska.
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