Determining Your Life Insurance Needs
Like auto insurance coverage, it is sometimes difficult to see the true value of life insurance coverage until you actually need it. In the meantime, the only way you will feel comfortable with your life insurance policy is if you understand, and agree with, the reasons you bought it in the first place.
There are many reasons for an individual to own life insurance coverage. Perhaps the most compelling reason is to purchase a death benefit which will provide for the financial needs of their survivors.
Determining how much life insurance coverage you need is a four step process:
- Determine total short term needs in the event of your untimely death
- Determine total long term needs in the event of your untimely death
- Determine total resources available to family members
- Provide insurance coverage for any remaining shortfall
Implementing a Cafeteria Plan
Internal Revenue Code 125 allows an employer to implement an employee benefit plan which allows employees to se1ect the benefit programs they prefer.
The plan offers two or more options and the employee chooses the option most appropriate for him or her. Because of the "menu" of benefits available, the plan is referred to as a "Cafeteria Plan".
Cafeteria Plans, along with 401(k)'s, are among the most popular employee benefit plans of the past decade. The tax benefits to the employer and employees far exceed the minimal required government reporting.