I hear this question all the time, “Do I really need life insurance?” A loaded question but the answer really is not that complicated. If someone will suffer financially when you die, chances are you need life insurance. Life insurance provides cash, also called a “death benefit”, that can replace your income and help your family meet many important financial needs like funeral costs, daily living expenses and college funding. An added advantage of the “death benefit” is that there is not a federal income tax allocated on life insurance benefits.
Below are a few scenarios I have seen during my time with W&A.
YOU’RE MARRIED
Many people make the mistake of not taking out a life insurance policy until they have children. If both spouses work, consider if the surviving spouse’s income is enough to pay off debts like credit card balances, student loans, car loans, your monthly mortgage/rent and utility bills? INSURANCE TIP: If you are planning on having children, you will want to buy life insurance before waiting until pregnancy – some companies will not issue a policy while pregnant.
YOU’RE MARRIED WITH KIDS
Most families depend on two incomes. If something suddenly happened to you, could your family continue to meet all your financial obligations? Could your family continue your current standard of living? Would the plans for the future – like college – stay intact? If one parent is able to stay home with young children, how would you cover the added expense of childcare costs while the surviving spouse goes to work? Life insurance ensures that your family’s plans do not leave when you do.
YOU’RE A SINGLE PARENT
As a single parent, you are the caregiver, breadwinner, cook, coach, tutor, chauffeur and so much more! Yet almost 60% of single parents have no life insurance on themselves, and many with existing coverage (maybe through their employer) say they do not have enough coverage. With so much resting solely on your shoulders, you need to make double sure that you have enough life insurance to safeguard your children’s financial future. INSURANCE TIP: Life insurance can be as affordable as your weekly stop for a cup of coffee!
YOU’RE A STAY-AT-HOME PARENT
Just because you do not get a paycheck does not mean you do not make a significant financial contribution to your family. Childcare, transportation, cleaning, cooking and all the other household activities that pop up in a day are all equally important and the replacement value of them is severely underestimated. With life insurance, your family can afford to make choices that best preserve their quality of life as they cope with the loss of a parent and spouse.
YOU HAVE GROWN CHILDREN
Your kids have graduated college, the mortgage is paid off and you are getting ready for retirement…still need life insurance? Answer this question: “If you died today, would your surviving spouse be able to stay on your current retirement track?” Would your financial plan, without life insurance, enable your spouse to maintain the lifestyle you both worked so hard to achieve?
YOU’RE RETIRED
Depending on the size of your estate, your heirs could be hit with an estate-tax payment. The proceeds of a life insurance policy are payable immediately, allowing heirs to take care of these taxes, funeral costs and other debts without having to hastily liquidate other assets, often at a fraction of their true value. Life insurance proceeds are also generally income tax free and will not add to your estate tax liability, if properly structured.
YOU’RE A SMALL BUSINESS OWNER
Life insurance can also serve as protection for your life’s work. What would happen to your business if you, one of your fellow owners or a key employee died tomorrow? Life insurance can help mitigate this risk. For example, a life insurance policy can be structured to fund a buy-sell agreement. This would ensure that the remaining business owners have the funds to buy the company interests of a deceased owner at a previously agreed upon price. That way, the owners get the business and the family gets the money. To protect a business in the case of a death of a key employee, key person life insurance, payable to a company, provides the owners with the financial flexibility needed to either hire a replacement or work out an alternative arrangement.
YOU’RE SINGLE
A lot of single people do not have a big need for a life insurance policy, but there are exceptions. For example, some singles provide financial support for aging parents or a sibling with special needs. Others may be carrying significant debt that they would not want to pass on to family members who survive them. Insurability is another reason to consider life insurance when you are single. INSURACNCE TIP: If you are young, healthy and have a good family health history, your insurability is at its PEAK and you will be rewarded with the best rates on life insurance that you get to carry with you for many years to come.
The most important thing life insurance can provide anyone, in my opinion, is peace of mind. Something I know we could all use a little more of these days! Never hesitate to give us a call and ask questions. We are here to help!
-Jennifer Cheatham, Wife, Mom, Life Insurance Agent and W&A Account Manager
