The next question is up. He said, "I just had a baby yesterday. Congratulations!" Tip number one: put the burp cloth on the shoulder before you burp him. There you go, that's a good one for free. Agreed. All right, well, congrats on the new baby, that's very exciting. But Kyle says, "I know I need to get life insurance. I hear that 10 times your annual income is a good rule of thumb. Should that be based on my current salary or expected future salary? And what else should he consider since he's now thinking about this as the next step in his financial life?"
I mean, Kyle, what, first of all, what a great father - literally Financial mutant 101 - the day after your child is born, your first thought is, "I gotta get some life insurance." Like fantastic planning. Okay, so let's start with the basics. Right. Like why do we get life insurance? We get life insurance because there are other human beings who depend on us to produce income and provide for them. And if something were to happen to us, then that income is not being produced. So when you think about how much life insurance do I need, the question I always ask my clients is, "Alright, if you were to die tomorrow, how much money would your spouse and your kids need to be able to do all the things that you wanted them to be able to do?" That might be like paying off the mortgage, sending them to college, being able to retire, being financially independent. And you add up the sum total of all of those different things and you figure out what your insurable need is. And so it's often kind of difficult to figure that out with any sort of laser-like precision. So what most young folks do, what most folks do in the early stages of their life is, "Okay, I'm gonna take my current income. If I make seventy-five thousand dollars a year, I'm just going to multiply that by 10. I think that's 750,000. I'm gonna go buy a term policy, 10 times income." And that's probably not a bad start. That's probably a pretty decent start. Again, that's a little bit of - it's like a generic solution to solve most people's problems. But as we age, as our life circumstances change, as our income changes, how do we adjust, Brian? How do we think about changing what we did when we had our first child, maybe in our mid-20s, to when we get into our 30s and 40s? How do we approach the life insurance evolution through time?
Yeah, but I think the reason people like the 10x rule is because it's easy. It is easy, and I would - because I can tell Kyle is trying to stretch to make sure that he's covered contingencies. So if you - there's nothing wrong with the 10x rule. I'm not throwing cold water on it. I'd even kind of expand it. I'd say if you have any debt, like mortgages, I would add that to the 10x rule. That way you get a little bit extra because term insurance is dirt cheap, especially when you're young. So for a little bit of expenditure, you can get a lot of coverage, and that's the most important thing. Now, I did write down, health does have an impact if you're helping now. But you know you have some weird family history, or there's some other things that you just worry about underwriting in the future. I don't think there's anything wrong if you want to goose it up even more if you are worried about some family health issues because I knew when I was in my 20s and 30s, I had great - when I'd give the blood results, I'd get great results. But I also knew there's a man in my family, you know, my grandfather passed away at 50, my father passed away at 55. That stuff haunts you a little bit, and you start thinking about it from an insurance standpoint. That's why I remember when they gave me a 30-year policy that took me - I got it when I was 35 years old - I was like, "Do they realize what they just signed up for?" And I mean, it was really - it was really an incredible moment for me. So health does come into play. I'd ask yourself, Kyle, to play that um - because I did remember, the goal is you have a need, but you're hoping that you're saving in the background so that you're financially independent, so you can self-insure at some point in the future. That's why it's okay that you're doing term because this is a limited need only for a term of time. The other thing I wanted to say is that there is nothing wrong with having multiple policies. My life changed, you know, with the first child, I had a policy, and then but as um - is that we had the second child, I bought another life insurance policy. I ended up having, like, it ended up stacking up, like, four policies. But what was cool about it is that they dropped off at different times, and I'm now getting to the stage of life where some of those term policies are starting to drop off. But that's okay because I still have a need, so I don't want them all to drop off. But but but it's okay that some of the older ones that have now the term is expired, the renewal cost is so much more that I'm not doing it. That's okay. So it's also kind of nice to have a little ladder approach with your with your life insurance. So I think that's okay. The only I want to put something in, not that I want to give you more homework, Kyle, while you're in this moment of celebration, but do not overlook, yes, life insurance is important, but also those estate documents, the will, and making sure who is going to be the guardian in case something happens to you and your spouse. Don't skip that step either because that's something that I find that that a lot of times in this joyous moment of expanding the family, you just need to make sure you're taking a kind of a 360 approach. So I want to make sure it's because to tack on to Kyle's specific question, should I base it on if I'm going to do the 10 times current income or future income, it's okay to do current income, understanding the future as your income increases, you can always add policies to supplement. There's nothing wrong with that strength. And if Kyle has like a mortgage or other things that are things that he would not want to leave unpaid off for his family, he could immediately also add that to the policy. For more information, check out our
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