How Life Insurance Can Help You Protect What Matters
Jul 30 2020
As a young couple trying to make ends meet, Cindy and Jason didn’t worry about life insurance. They figured they had plenty of time to figure it out. Then Cindy’s unexpected death left Jason a single parent, scrambling to take care of the household expenses on his own – while also trying to deal with his and his children’s grief.
Because Life Can Change in an Instant
It was a typical day. Jason fed the kids breakfast while Cindy walked the dog. As Jason left for the office, Cindy packed their 4- and 7-year-old daughters into the car so she could drop them off at daycare before heading to her photo shoot.
As usual, Cindy’s heart clenched a little as she waved goodbye to her girls. On the drive to her studio, she wondered if the long hours and penny pinching to get her fledgling photography business off the ground were worth it.
She loved her work – capturing not just someone’s image, but a bit of their personality with each shot. More than a job, photography felt like a calling. But more months than not, she and Jason struggled to pay their bills.
Wrapped up in her thoughts, Cindy didn’t notice the truck that failed to stop as she crossed the intersection.
Jason was meeting with his manager when his phone started to vibrate. Without looking at it, he sent the call to voicemail, so he could focus on the meeting. When he got back to his office 20 minutes later, his phone light flashed – indicating a new voicemail message.
Before he could check it, his cell phone rang again.
It was his mother-in-law, who rarely called him – much less on a Tuesday morning.
“Hi, Deb – what’s up?”
“Jason,” she hedged, the tone of her voice putting him immediately on edge. “There was an accident. Cindy – ”
Jason held his breath, heart racing as Deb’s voice broke on her daughter’s name.
“Jason, Cindy didn’t make it.”
The following weeks blurred into a fog of funeral arrangements, condolences and impossible questions. The hardest part was telling his daughters that their mother had died. The second hardest was trying to figure out how to live their lives without the person their world had revolved around.
Then there were the finances. Jason received Social Security benefits for the girls, which helped, but –between funeral costs and trying to survive on one income – what was once a struggle became insurmountable, and Jason was forced to decide between selling the house and picking up a second job.
Jason thought about life insurance more times since Cindy’s death than he had in his entire life, wishing they’d each gotten policies after their girls were born. But Jason is far from alone. The Insurance Information Institute reports that 40% of people don’t have any life insurance – and of those who do, 1 in 5 say they don’t have enough.
So how much is enough?
How Much Life Insurance Coverage Do I Need?
Some companies offer employees low-cost or free life insurance coverage as part of their benefits. But it’s often 1 to 2 times an employee’s annual salary, and if you’re the primary breadwinner for your family, that might not be enough of an insurance plan.
When considering your insurance options, coverage and the best plan to buy, you need to consider your lifestyle, family status, income and goals. You’ll also need to think about how your family would get by without your income and the household tasks you usually do. Without you, would your family need to hire a lawn, snow or cleaning service? If you usually take care of the taxes and finances, could someone else take that on, or would they need to hire someone to do it?
This calculator from Life Happens, a nonprofit financial education organization, can help you get started. By taking into account factors like funeral expenses, debt and college funding for children, you can come up with an estimate of how much life insurance you may need. Then, the best way to be confident you have what you need is to meet with your agent, who can go over questions and options specific to your goals and situation. We’ll also ask questions you might not think of, such as whether you want insurance to help you with your estate-planning goals.
Consumers have a lot of misunderstandings about life insurance – including overestimating insurance rates. According to the Insurance Information Institute, 44% of millennials expect the cost to be 5 times the actual amount. Keep in mind, the younger and healthier you are, the lower your insurance rates will likely be.
Many people also wrongly assume death wipes out a person’s debt. But the truth is any assets you have must be used to pay your debts before remaining resources go to your beneficiaries.
What Kind of Life Insurance Coverage Do I Need?
There are 2 main types of life insurance – term insurance and whole or permanent insurance.
- A term insurance policy pays if death occurs during the policy's term, typically anywhere from 1 to 30 years.
- A whole or permanent insurance policy is generally more expensive, because it pays whenever the policy holder dies.
Along with your policy, you might want to consider “riders,” which are extra coverage for situations such as disability, critical illness and terminal illness.
Planning for the Future
Insurance is all about preparation and protection. It’s about preparing for the unexpected, so you can protect your assets, family and finances as much as possible should the worst-case scenario happen.
Jason’s family and friends rallied around him and his girls, throwing a spaghetti feed and silent auction to raise funds to help him bridge his financial gap while he looked for a job that paid him enough to keep his house without sacrificing additional time with his daughters.
In the meantime, Bell Insurance helped him find an affordable life insurance plan that also gave him the peace of mind he needed to know that should another tragedy occur, his daughters wouldn’t have to worry about finances as they grieved the loss of their dad.*
*This story is a fictionalized account of a real scenario, created for illustrative purposes.