September is Life Insurance Awareness Month and I want to do my part to help promote this often overlooked need. As a Certified Financial Planner (CFP®), life insurance is a topic I discuss with all my clients. Many would prefer to avoid this discussion, even though we all know death is one of life’s certainties. What isn’t certain, however, is when we will die.
Many years ago, I had a client who would listen every year as I pointed out his need for life insurance and then politely decline. One year, he finally decided it was time and purchased a policy. Shortly thereafter, he was diagnosed with cancer and was only expected to live a few more months. I was devastated, knowing that he would leave behind a young wife and family, but also relieved that he protected what I knew meant the most to him.
I had a chance to see him one last time before he passed away. Before I could even speak, he said, “Thank you.” He thanked me for not giving up on him and allowing him to give his family one last gift: the gift of financial security. They would not need to move out of their home. The girls’ college education would be paid for. Their lives would forever be changed, of course, but money wouldn’t be a struggle for them and that give him great peace.
I’d like to help give you the peace of mind of knowing your family is protected too.
Who Needs Life Insurance?
Many people view life insurance a bit suspiciously and too many willingly gamble that won’t need it. Here’s some food for thought: You don’t buy life insurance for you. You buy it to protect your loved ones.
Married Couples Without Children
Some argue that life insurance is unnecessary until you have kids. I disagree. Here’s why. Whether you and your spouse make a little or a lot, you likely live off that amount. Meaning if tomorrow, half or more of your monthly income disappeared, you would probably not be able to cover your living expenses without dipping into your emergency fund to offset the loss ongoing. Certainly some expenses decrease (i.e. food) but your rent or mortgage stays the same and that is typically your biggest monthly expense. You can, of course, downsize, but that typically doesn’t happen overnight either, or you may prefer to keep your home too. You also inherit joint debt, which now you have to pay on one salary.
Married Couples with Children and Single Parents
The same reasons from above apply here with one big additional reason: protecting your kids. You want to make sure their needs are meet and to give a surviving spouse or guardian the means to take care of them.
Parents with Disabled Adult Children
This is incredibly important and goes beyond having life insurance to cover their expenses. You are your child’s biggest advocate and I encourage you to work with an estate planning attorney and your financial advisor to put things in place to make sure they receive the care they need and deserve in your absence.
Please note: if you are taking care of a disabled parent, you should also take steps to protect them as well.
Young, Single Adults
Many single, young adults don’t believe they need life insurance, but I will give you four reasons why you might.
1. You Have Co-signed Debt
When a single person typically dies, their estate goes towards their debt and if there still is any outstanding debt, it is typically forgiven, which is why many single people believe they don’t need life insurance. However, if you have co-signed debt (your parents co-signed your student loan, car, mortgage, credit cards), they will inherit that debt.
2. Your Parents (or others) Rely Financially on You
We don’t talk about this often, but there are many older parents who rely on some financial assistance from their kids. And I don’t mean help with long-term care expenses (although that happens frequently too), but with basic care needs, like buying groceries and paying for utilities. If you currently help your parents or you suspect you will need to in the future, you need to consider what will happen to them if you are not there to provide assistance.
3. Your Funeral Expenses
Funerals are not cheap ($7,000-$15,000) and paying for these expenses will fall to your parents. You can at least ease the burden a bit by providing the funds to cover this cost.
4. You Expect to Get Married and Have Children
If you’re considering term life insurance, generally the younger you are, the healthier you are, which typically means you will have a lower premium. If getting married and having children is on your bucket list, then it may make sense to lock in a low rate now. For most young adults, it only means forgoing a night out per month to pay for the premium.
You Own a Small Business
If you own a small business with a partner(s), you may want to insure your business partner’s life. This way you have the funds to buy their share of the business and keep it running if they should die unexpectedly. An attorney can help you set-up a buy/sell agreement with your partners and structure it properly.
Protect Your Most Valuable Asset — Yourself
It often baffles me why so many people overlook or outright ignore their life insurance needs. We insurance our health, our homes, our cars, our valuables and even our pets. Who pays for your home, your car, your valuable and your pets? You do. And what happens if you are no longer here to provide for your family or able to earn to income? You are your most valuable asset. I hope you make the smart choice to protect it.
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