Step 5: Review Insurance and Wills
Phase 2: Build a Routine · Step 5 of 12
Protect the people who count on you.
In short
Get term life insurance, write a will and sign powers of attorney. It's the least fun step and one of the most important. If something happens to you, your family gets money and clear instructions instead of a mess.
Why this comes now
These cost money, so they come after the debt that was costing you the most. With high-interest debt gone and a cushion in the bank, you can afford a modest premium and a simple will, and you now have real progress worth protecting.
How to do it
- Estimate your life insurance need two ways: all your debts plus about $150,000 per child for education, or 10 times annual income. Round to $250,000, $500,000, $750,000 or $1 million.
- Buy term life only, not permanent (whole or universal) policies or AD&D. Choose a term that lasts until your youngest is through school or the mortgage is gone.
- Write a will that's valid in your state. Name an executor, a guardian for minor children and a trustee to manage money for them. An online legal service is fine for a simple estate.
- Sign healthcare and financial powers of attorney and a living will, each with a backup.
- Name beneficiaries, and backups, on every account and policy so that money skips probate.
Example Family: Alex and Jordan
Their kids are Maya (6) and Leo (3). Alex earns about $48,000 and Jordan about $32,000. Each buys $500,000 of 20-year term: $52 a month for both. Their mirror wills name each other first, Jordan's sister Casey as backup executor and guardian, and Alex's brother Mike as trustee. Recurring Expenses rise to $2,000, leaving a $1,000 surplus.
Examples are hypothetical.
You're done when
Term life is in force, your wills and powers of attorney are signed, and every account names a beneficiary.
Your next step
For education only. Not individual financial, tax or legal advice. Talk to a tax pro or attorney about your situation.