Insurance - How much is too much?

[This question originated from a reader who read the article "Life Insurance: Too Much, Too Little or Just Right?”]

Q. I am 58 and have had 1/2 million life insurance on my 41 year old wife for about 10 years. We have two kids, 5 and 7. Her brother, 43 has 1 mil on his policy and he is influencing her to get same.

My agent who is conservative says talk to your business lawyer and trust lawyer and see what is best.

We have a 1/2 mil mortgage. The house equity should be at least 1/2 mil. I have investments and cash at about 1/2 mil. The cost of the additional 1/2 mil insurance is $1800-2000/year with a medical required. I have glaucoma and some slight but burdensome health issues. No heart record.

DO I REALLY NEED MORE LIFE INSURANCE????

House mortgage plus expenses would be at $5K/month. So if I die she has 1/2 mil and $60K to pay per year to stay in the house.

She should sell it and move into a nice rental house we have nearby. YOUR ADVICE IS MUCH WELCOMED. We need a financial planner by the way.

A. Thanks for your question--your concerns are common and I congratulate you for taking the time to get additional information!

Your situation may be more complex than it may appear at first. To provide a more specific recommendation I will need to talk with you further. It sounds like you have been very successful--how much do you have in investments and retirement accounts for which your wife would be the beneficiary?

You mentioned your agent suggested you talk to your business or trust lawyer--do you own a business? If so, can you tell me about it. I will want to know whether it is a sole proprietorship, LLC, Sub S, C Corp, etc. as well as the equity value and any business continuity plans. For instance, would the business provide any additional income to for your wife after your death?

Trust lawyer--do you have a trust? If so, is it a revocable living trust? Are there separate trusts for you and your wife? If so, is she a beneficiary of your trust, etc.

At first glance, it would seem to me that the amount of insurance should be increased, especially since you have two young children. The insurance will not only be providing for your wife but also for your children (depending on your trust situation, etc.).

For instance, I have 4 young children and my wife doesn't work outside the home (although she works awfully hard inside the home!). I have $2 million in life insurance coverage. Since I'm 40 it isn't as costly as it will be for you.

I'll be happy to talk with you about this further, without any cost or obligation. It would be best for us to set a time to speak by phone. If you would like to do that, send me an email with 1 or 2 different times that would work well for you and I will confirm one of them.

Your posted comments on this and other questions are welcome.
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