Thursday, August 27, 2015

Laddered Income Replacement Coverage

One common approach to determining the amount of life insurance needed for income replacement is to calculate the present value of the future stream of income. The typical recommendation is to buy a policy with a face amount equal to the current replacement need, and with coverage lasting until retirement.

Of course, the longer we live, the fewer years of expected future income remain. As a result, we'd expect the income replacement need to decline over time. Could there be an opportunity to save a bit of money by buying two or more smaller policies with laddered durations? 


This tool identifies the combination of 10, 20, and 30 year term policies required to most efficiently match the coverage in effect to the need remaining. Go ahead and enter your own values to see what portfolio of coverage could work for you.

No comments:

Post a Comment