April is National Financial Literacy Month. The goals of Financial Literacy Month is to educate Americans on some important but often overlooked financial issues. Perhaps one of the most fundamental threats that any American family faces is the death of a parent. That’s especially true if there are minor children in the home.
Even though unexpected death is a major financial risk, studies show that many households have taken few or no steps to protect themselves. A 2015 study from Bankrate found that only 60 percent of Americans had life insurance, and half of those had less coverage than they needed. Among families with children, 37 percent had no life insurance protection, while 32 percent had less than $100,000 in coverage.1
There are many reasons why people don’t carry enough life insurance. Some people may feel that they won’t die soon, so insurance protection is unnecessary. Others may underestimate just how much money their dependents would need to sustain their standard of living. Some may believe life insurance is too expensive for them to afford.
The truth is that life insurance can be a valuable resource for your family during an already-difficult period. In many cases, life insurance is also relatively affordable. Below are several ways your family could use life insurance to stabilize their finances after your passing. If you’re not sure if you have enough coverage, now may be the time to assess your needs.
Burial and Other Final Expenses
If you should pass away, your family will likely want to have some kind of service to celebrate your life. Those services can be costly. Even a modest funeral and burial can cost thousands of dollars. Without life insurance, your family may be forced to pay this cost out-of-pocket. Or they may be forced to hold a ceremony that doesn’t meet their desires or expectations. Life insurance is an easy way to cover these costs and relieve your family of the burden.
Is your family dependent on your earnings? How would their lives change if your paycheck wasn’t available? Perhaps one of the most effective uses of life insurance is as an income-replacement tool. Upon your death, your family receives a lump sum. They can then use those funds to generate income in the future. That could help them maintain their standard of living.
You may not generate a significant amount of the household’s income, but you probably contribute in other ways. For example, you might stay home with the children while your spouse pursues his or her career. You might take care of most of the household management and repairs.
Think about what challenges your spouse may face without your contributions. He or she may have to hire a nanny or send your children to day care, either of which would come with high costs. He or she may need to hire a housekeeper or may spend significantly more on lawn care or dining out. Again, life insurance can be used to help cover these costs.
Your family likely has debt such as a mortgage, car loans, credit cards and more. Given all the other challenges your family may face after your death, you may want to relieve them of the burden of paying this debt. For example, perhaps you want to pay off the mortgage so your family can be certain they could stay in the family home. Life insurance could be used to pay off these debt balances after you pass away.
You may have other goals for your family after you pass away. A common goal is to fund educational expenses for children. Or perhaps you’d like to leave money in a trust that your children could access as adults. All of these goals and more can be accomplished with life insurance.
Do you have sufficient life insurance coverage for your family’s goals and challenges? If not, let’s talk about it. Contact us at Legacy Retirement Services. We can help you analyze your needs and develop a protection plan. Let’s connect soon and start the conversation.
Licensed Insurance Professional. 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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Terry L. Tyler