How much life insurance do immigrant need is a frequent question we help people with. After determining if you are eligible for life insurance, the next task is to figure out how much life insurance you should purchase. Most people are underinsured should the worst happen, so it is helpful to talk to a trusted advisor to help determine the correct life insurance to purchase.
How much life insurance should I purchase? Here are common areas of responsibility that people like to fund with life insurance:
When you die, your ability to produce income dies with you. If you are earning $60,000 a year when you die, your family will no longer receive $60,000 a year in income. Purchasing life insurance to replace your $60,000 worth of income is a responsible decision, but it only protects your family for one year. What happens after the money is gone?
Many insurance experts recommend ten times your income in life insurance. If you earn $60,000 a year, that would equal $600,000 in life insurance. However, for many immigrants, that amount of life insurance is too expensive.
If you’re making $60,000 year and have a wife and two children to support, then you only have so much money to spend each month. A better question would be how much can you budget each month to invest in life insurance to protect your family?
If $50 a month premium will buy you $150,000 of life insurance coverage, that is 2.5 years’ worth of income replacement if you are earning $60,000 a year. If $75 premium a month will buy you $250,000 of life insurance, it is over four years’ worth of income replacement if you’re earning $60,000 a year. Both $150,000 and $250,000 life insurance coverage will be a huge financial safety net for your family should you die unexpectedly.
Having 2.5 to 4 years’ worth of life insurance coverage is an important financial safety net for immigrant families. When your family receives your life insurance death benefit, it buys them time to make the right financial decisions.
Your family doesn’t have to sell your home quickly or sell automobiles if you own life insurance; they can pay off debts, you can keep your children in the same schools, you can keep your business running, and you can have peace of mind knowing there is insurance money to replace your income.
One of the great American dreams is to have your home paid for, free and clear. Most families will achieve this dream given enough time; this often takes 15 to 30 years for most families if you don’t die.
When you die, your family probably cannot afford to make mortgage payments, much less think about paying the house off, so the bank doesn’t take it back in foreclosure or bankruptcy.
Having life insurance in place to pay off your home when you die is one of the most loving things you can do for your family. It allows them to:
- Preserve the equity in your home (mortgage balance minus home market value)
- Allows your family to stay in the same neighborhood
- Allows your children to stay in the same school district
- Allows your family to stay close to those who love and the support them in your neighborhood and community.
If you have a 30-year mortgage, you don’t need to purchase 30 years’ worth of life insurance. Many immigrants pay extra amounts on top of their monthly mortgage payment each month to pay the house off sooner.
If you pay an extra $100.00 a month on your mortgage payment each month to the lower the time you have to make mortgage payments, it may allow you to pay your home off in 20 years.
In the above example, you could save money by purchasing a 20-year mortgage protection plan, instead of the 30-year mortgage protection plan. This will help you better afford the insurance coverage you need with your family budget.
If you had a $150,000 mortgage at the start of your 20-year payoff plan, and you had a 15-year mortgage protection life insurance policy, in 15 years, your life insurance policy would terminate. This would leave five years’ worth of your mortgage unprotected. For most people, even this situation will work out well.
You would likely have a mortgage balance at year 15 of around $30-$40,000. If you died after year 15, the family could simply refinance the home for $30-$40,000 and have an affordable home payment that would allow them to keep your home after your death.
Bundling income replacement insurance and mortgage protection is a great start for many immigrant families. This assures your home is paid off free and clear, and your family has replacement income to continue paying living expenses.
Life insurance proceeds will go even further when your home is paid off because your family no longer has a mortgage payment. If your home mortgage payment is $1500 a month, this frees up $18,000 a year that your family will not have to spend on mortgage payments.
Personal and Consumer Debt
Most immigrant families have additional debt in automobile payments, credit card payments, and other unsecured debt (televisions, furniture, etc.). If you are married, when your spouse dies, you will be responsible for all the personal and consumer debt purchased while you were married to your spouse; you cannot get out of paying these bills.
Your family will need transportation and furniture after you die. Having life insurance in place to cover these expenses is a caring and loving thing to do for your family. Most of these expenses can be included in your income replacement life insurance policy. If you have enough extra unsecured debt, then it is wise to consider insurance coverage to help offset these expenses.
Many undocumented or immigrants with green cards have children born in the United States. If your child is born in the United States, they automatically become a US citizen. Being a US citizen allows your children unlimited potential to become what they want to be later in life. To help children to succeed, many would like to see their children get a college education.
Affording college education for your children is difficult for most families. It becomes impossible if one income-producing family member dies unexpectedly. Often, when a parent dies, the dream of their children going to college dies with them.
Most in-state colleges cost roughly $25,000 a year. A $100,000 life insurance policy would fund your child’s college education should you die unexpectedly. Your children can stretch his money even further by attending two years’ worth of community college and then transferring to a four-year college.
If your child is 14 years old, purchasing a 10-year life insurance policy would protect the time needed to pay for your child’s college education. If you had a $100,000 life insurance policy to cover college expenses for your child, it would protect your child’s education until they were 24 years old; your child would be out of college by this time.
So, with an affordable 10-year life insurance policy, you’ve just protected your child’s ability to get a college education should you die unexpectedly.
Many immigrants purchase a 20 or 30-year life insurance policy when the children are younger for income replacement, and purchase a 10-year life insurance policy intended to cover their child’s college expenses when the children get older.
This assures you don’t overpay for insurance, and only purchase life insurance for specific needs and financial responsibilities with a specific length of time (such as mortgage protection and college education cost).
Student loan debt
Most students who get degrees in the United States end up with student loan debt. They could not have gone to college if they had not taken out a student loan to pay for their education. Many college students get out of college with anywhere from $25,000-$80,000 worth of college loan debt.
When a parent co-signs for a college loan, they are assuming all responsibility for the entire loan balance. If their child died, the parents would still be responsible for paying off their college loans if financed through a private loan company (federal student loans are treated differently than private student loans).
With the majority of student loan debt being held by private companies, the parents must pay this money to the lender if their child dies prematurely. Fortunately, because our children are young and healthy, these policies are affordable.
Most families have trouble keeping up with their regular bills, much less adding $25,000-$80,000 worth of college loan debt if their child died unexpectedly while still in or out of college (with college debt). Insurance plans for these lower amounts of coverage is affordable.
Term life insurance policies tailored for the time your child’s college loans will be owed is affordable. Some families even consider accidental death policies as a great option because most young students are very healthy; the accidental death policies are affordable.
Immigrants are some of the hardest working people in the United States; they are also some of the most entrepreneurial minded in the United States. Many immigrants own businesses that support their family.
Most people starting businesses, or growing businesses, require financing to fund their business or to fund future business growth. This business debt will still be owed when a business owner dies.
It is an unfortunate business reality that our best plans rarely happen the way we would like them to happen. If everything goes right, and we stay healthy and alive, all business debt will get paid off. But it makes sense for most business owners to have a plan in place to pay off the business debt when they die.
Some business owners have partnerships with other people. Having a buy-sell life insurance agreement in place allows the surviving business owner to purchase the deceased business owner’s portion of the business. This allows the surviving business owner to provide for their family and own the business free and clear. It also allows the deceased business owner’s family to get a financial payout on the company that their loved one worked so hard to build.
These are just a few of the most popular reasons immigrants purchase life insurance. Any life insurance is better than no life insurance; purchase what you can afford now, and you can always purchase more coverage later.
While purchasing life insurance may seem overwhelming at first, we make the process easy. Protecting your family or business is one of the most important things you will do in your lifetime.
It’s important to get it right; we are experts in helping green card holders and foreign nationals get the affordable protection they need.
Call us today at (888) 630-9422 and we will find you the best life insurance protection for your needs.