Life insurance is not for the person who dies; it protects the people who live. Would you believe that 1 in 5 families with children under age 18 does not have life insurance? As shocking as that may be to many of us, a 2018 study by LIMRA, a leading insurance and financial services trade organization, also found that 3 in 10 families would be in immediate financial trouble if a primary wage earner died. And, nearly half of respondents would experience financial adversity in just six months.
LIMRA estimates that 48 percent of U.S. households are underinsured by an average of $200,000.
Sadly, the LIMRA’s 2018 survey found that the most common reason respondents gave for not buying insurance was they incorrectly believed it was too expensive. Indeed, most estimated the cost of a $250,000 policy for a healthy 30-year-old at three times its actual cost of an average of $160 a year – the monthly cost for many common expenses. Life insurance prices, especially term life, have remained at affordable levels while other daily expenses have increased.
Now is an ideal time to re-examine the amount of life insurance you and your family have in force.
Most people put off this task for one of two reasons:
- The thought of losing a loved one is difficult to handle. It makes people uncomfortable to consider a world without that person in it.
- They find the task too complicated and burdensome.
Let’s address the second part first by admitting that for many people, deciding what type and how much life insurance to buy is complicated. That’s why consulting an independent insurance agent is so crucial to the process.
An agent can help you consider the right questions. For example:
- What are your average monthly expenditures and how long will they continue? Basic utilities (electricity, water, trash) and common comforts (cable/satellite/streaming services, internet, wireless plans) will always be needed. Mortgage payments, car payments, and child expenses, on the other hand, likely will diminish. Knowing how much of each wage earner’s take-home pay is used to cover these expenses helps to determine how much life insurance is needed.
- What is your timeline?Identify your “peak need” years by examining the ages of any children and their educational or medical needs as well as the number of years left on any loans. Finally, understand that there will likely always be a need for life insurance for income replacement, survivor benefits or final expenses. An agent can help build the perfect coverage plan for your family’s specific needs.
As for the uncomfortable thought of losing a loved one, turn the idea around. Ask yourself “will my family be able to survive financially after I am gone?” If you view life insurance as taking care of your family, you gain a better perspective on the need for life insurance.
Remember, life insurance is not for the person who dies; it protects the people who live.
Neither Johannesen-Farrar Insurance nor its representatives offer tax or legal advice. Consult with your tax adviser or attorney about your specific situation. For policy service and additional information, speak to Matt Becker at 262-728-2631. For a complete statement of the coverages and exclusions, please see the policy contract. All applicants are subject to underwriting approval.
By Brian Druley, The Cincinnati Insurance Company