According to a 2015 survey by Bankrate, nearly 40 percent of Americans don’t have life insurance. Of the 60 percent who do, half of them may have insufficient coverage. Among families with minor children, 37 percent don’t have coverage, and an additional 32 percent have less than $100,000 in protection.1
Life insurance is often a difficult expense for many families to justify. They may feel that other needs are more urgent and important. They may believe that, because they are young and healthy, death isn’t a major threat for them. They might assume that if they passed away, their parents, siblings or other family members would care for their children.
Many families simply overestimate how costly life insurance really is. A 2015 study by LIMRA found that the average millennial assumes term life insurance costs 213 percent more than it actually does. Members of Generation X overestimate the cost of term life insurance by an average of 119 percent.2
Regardless of your reasons, if you have minor children or other dependents, it’s important that they have financial protection in the event of your passing. If you should pass away, your kids and spouse would not only lose you as a family member, they would also lose your income and the other care and support you provide.
How does life insurance benefit children, spouses and other dependents? Below are a few of the most common ways that survivors use life insurance after a loved one passes away. Think about how your family would pay for these expenses if they didn’t have life insurance to provide support.
According to analysis done by Parting.com, the average funeral costs about $7,000.3 Understand, that includes only the costs associated with the actual service, such as the gravesite, the casket and funeral home services. Your family may have other final expenses. The $7,000 figure doesn’t include flowers or any kind of reception for friends and family.
Your passing will obviously be a trying time for your family, both emotionally and financially. A proper funeral will provide some bit of closure. Without life insurance, your family may not be able to have the kind of goodbye they would like, or they may have to finance the costs through the funeral home, further compounding their financial challenges.
If you die at a relatively young age, it’s possible there could have been medical treatment in the time leading up to your passing. You might be in an accident that requires complex medical care. You could have a terminal disease like cancer that requires months, or even years, of treatment.
After you pass away, your family will be left with those bills. Even if you have health insurance, it’s likely that your family could still face some out-of-pocket expenses. Life insurance can help cover those costs so your family can move forward without that financial burden.
Mortgage and Other Debts
Your death will be a major disruption in your family’s life. You probably don’t want their lives interrupted further because they are forced to move. However, if you’re the primary earner in the family, it’s possible they may not be able to afford the mortgage after you pass away. The same is true of credit cards, auto loans and other debts.
Life insurance can provide a substantial lump sum that your family can use to eliminate those debts. That allows them to stay in the family home and move forward with a strong financial foundation.
Most important, life insurance can act as a replacement for your income or other support you provide. Yes, your spouse may eventually be able to earn more money and cover the costs himself or herself. However, that process could take years.
Life insurance can serve as a reserve pool to help cover those expenses during the transition period. It gives your spouse some time and breathing room to learn new skills and pursue a higher-paying job.
Even if you don’t work outside the home, you still provide valuable support. You might care for the children during the day while your spouse works, or you may do most of the shopping, cooking and cleaning. If you passed away, your spouse would likely need to pay for child care and possibly even other services. Your contributions should be covered by life insurance, too.
Not sure if you have enough coverage? Contact us at Baacke Insurance Services in Sarasota, Florida, for more information. We can help you analyze your needs and your current coverage to develop a stronger protection plan for your family. Let’s start the conversation today.
This information is designed to provide a general overview with regard to the subject matter covered and is not state specific. The authors, publisher and host are not providing legal, accounting or specific advice for your situation. By providing your information, you give consent to be contacted about the possible sale of an insurance or annuity product. This information has been provided by a Licensed Insurance Professional and does not necessarily represent the views of the presenting insurance professional. The statements and opinions expressed are those of the author and are subject to change at any time. All information is believed to be from reliable sources; however, presenting insurance professional makes no representation as to its completeness or accuracy. This material has been prepared for informational and educational purposes only. It is not intended to provide, and should not be relied upon for, accounting, legal, tax or investment advice.
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