- Personal Finance»
Life Insurance - Life AFTER Death!
Life Insurance Is Not Just for Final Expenses
So many people think life insurance is just to pay for someone's funeral. And that's partly true. But life insurance is really more for those who are left behind - a spouse, children or other loved ones, who depended on the deceased's income to survive. In short, life insurance is to guarantee there is life AFTER death.
True story: A good friend lost her husband suddenly and unexpectedly. Neither of them had any life insurance. She had been out of work due to a medical problem, and he had just changed jobs and had not yet qualified for his company's benefits, including life insurance. On top of all that, they were up to their eyeballs in debt, with a foreclosure looming on their home in the near future . And then it happened. The husband was found dead in his office from a self-inflicted gunshot wound. Suicide. He was only in his early forties. He had two children - both in high school but preparing for college in just a few short years. His wife had several medical problems, no job and no savings; much less money to bury her husband. Torn apart and deep in grief, the family struggled over not only over how to pay for the man's funeral, but how to handle the mountain of debt and financial uncertainty he left behind. His wife chose a simple funeral plan and had him cremated. She fought with his family over "who should pay for what", and his cremated remains were left behind in the funeral home until they could come up with at least a partial payment on his funeral. The whole situation was filled with intense grief, bitter words and devastating financial consequences. But the saddest part of the story was that all of that could have been avoided for less than $50 a month worth of life insurance on her husband. (Depending on actual age, health and tobacco status). And even though he committed suicide, most states will still pay out as long as the policy has been in effect for at least two years. A small price to pay to avoid the huge financial burden he left behind.
I'm a life insurance agent and fortunately, this story is NOT the norm. Most people have life insurance either personally, or through their job. But there are so many more who do not, and what's worse, do not seem to see the necessity in it. If that is you, then please take the time to finish reading this hub. It could "gravely" impact the lives of your family and loved ones. And if you choose NOT to read it, it could COST them everything you own! Now that I've got your attention....
First of all, life insurance can and does help pay for FINAL EXPENSES. But do you even know what the average cost of a funeral is nowadays? Try about $10,000 for a basic funeral service. (Cremation may be cheaper, but often doesn't include memorial services, arrangements or special requests.) And with funeral costs rising like everything else, that could easily triple in the next thirty years! I don't know about you, but I don't have that kind of money just "laying around" in case my husband passes away tomorrow! Neither does his family, nor would I expect them to take on that expense. When we married, we agreed to take care of each other "til death do we part", which includes making sure we each have enough life insurance to make sure the other is not left holding the proverbial "bag of debt". And I would sure hate to have to sell our home which we both worked so hard for so many years to buy, or empty our savings/retirement accounts, just to hand over to the funeral home. Not to mention, what's going to happen to ME after he's gone? How will I survive without his income and still be able to pay the mortgage and other household bills? And what if we had young children who still needed braces or wanted a car or to go to college? How in the world would I provide for them? I'm not cold-hearted or unsympathetic, but just because he's gone doesn't mean WE stop living! Which leads me to the second point:
Life insurance is for LIVING EXPENSES. When a loved one dies, his or her spouse and children are left behind WITHOUT that person's income to depend on. If he or she was the soul breadwinner, that can be a substantial loss in monthly income that the family depended on, not only for current expenses, but for FUTURE expenses, as well! Braces, cars, clothes, college, etc. - all this can add up and put a HUGE financial strain on a two-income family, and an even BIGGER strain on a one-income family! And there's still the mortgage, the vehicle loans and other debt that young couples so often have while raising a family. What happens when a two-income household becomes a ONE-income household?
On the average, a life insurance policy for the primary breadwinner should be about five times his or her annual salary. Hence, if Mr. Smith was making $100,000 a year on his job, his insurance policy should be at least $500,000, depending on his family's lifestyle, debt and dependents. If he is young, has at least two small children, a wife and a hefty mortgage, its not unreasonable for him to carry as much as $1,000,000 of term insurance for at least 15 years, or until his children have graduated college. Otherwise, his sudden or untimely death could also mean the death of his children's dreams of going to college, and his wife's dreams of an early retirement. And guess how much that $500K policy would have cost Mr. Smith each month? You got it - about $50/month, depending on age, health and tobacco status. He probably spends that much playing golf a few times a month!
But what about life insurance at work, you ask? Isn't that enough? Glad you asked! Most employer-sponsored life insurance plans are term plans for only a year's salary - about $100K for an executive, and $25K for a blue collar worker. (Estimates only) And what if Mr. Smith left that job or got laid off? Well, there goes his life insurance, too! Unless he plans on staying at that company and retiring, more than likely, he'll never have anymore than what he's currently got. Meanwhile, he's getting older and as he does, so does the cost of insurance. If he does get laid off in five or ten years, he'll have to pay higher rates for life insurance due to being older and/or any health conditions he may then have. That's why its best NOT to depend on employer-sponsored life insurance - its usually just the bare minimum, and only good while you're employed with that company.
Okay, so what about funeral homes? Won't they "eat the cost" if someone doesn't have life insurance? Let me clear this myth up real quick; funeral homes are NOT non-profit organizations! They have rising and inflationary costs just like any other business, and cannot afford to "eat the cost" of every funeral they service. And while funerals can be as simple or as elaborate as you want, the fact remains that neither way is cheap, and "payment is expected when services are rendered". Its NOT the funeral home's responsibility to pay for YOUR loved one's funeral - that's YOUR responsibility. (Although occasionally, a funeral home WILL offer a reduced or even no-cost funeral for a child's funeral or someone extremely poor or indigent). And while some may think funeral homes are "rip-offs", they do provide a service that takes a tremendous amount of stress off a grieving family, and help them remember their loved one in a respectable and loving way. A funeral is still the best way to bring closure to the loss of someone we love, and allow others to pay their final respects.
Hopefully, by now, you see more and more WHY you need life insurance, and how your family and loved ones depend on it AFTER you're gone. Death is most certainly a part of life - the part we fear and dread the most. But a lot of times, its what happens AFTER death that causes even more grief and suffering - when we are left to carry on WITHOUT our precious loved one, AND left to carry on WITH a mountain of debt and financial burdens. Don't let that happen to YOUR family! As a life insurance agent, I encourage you to make the time to talk to a trusted member of the insurance industry, and find out how much life insurance your family needs to be able to continue on should something happen to you today! Then make the application and get a plan in place. Its YOUR responsibility and something your family is depending on you to provide for THEIR future!
If you live in Eastern N.C., please contact me personally at firstname.lastname@example.org for more information about how to become a Woodmen of the World member!