Tips to Help You Determine if You Really Need Life Insurance
When the stock market began going through its challenging times, many of us put our heads in the sand. We now understand the importance of getting back into the market. There is another financial area that is often neglected but just as important – life insurance. Today, we will consider the benefits that life insurance can offer us at different stages of our lives.
For the most part, single adults do not need to have large life insurance policies. The biggest concern is making sure that final expenses are covered so that surviving family members do not have to struggle to cover the costs.
There may also be some outstanding debts. Usually, smaller debts are eventually written off by the creditors, but any debts that were borrowed with a co-signer will still need to be paid. Since co-signers are still responsible for the entire remaining balance, life insurance proceeds can relieve the co-signer of some of that burden.
Some single adults may also consider leaving a financial legacy with a favorite charity. For the cost of the monthly life insurance premiums, life insurance can help individuals to provide a sizable donation to help further the cause of a charitable organization.
If a single adult is also a single parent, the support and care of the minor children will be very important. Life insurance proceeds can help the designated guardian to continue to provide for the children in the manner that the parent intended.
Married adults have many of the same financial concerns as the single adult. Life insurance proceeds can also enable the survivors of married adults to cover final expenses. In this stage of life, there is a surviving spouse who will still be responsible for the debts. Married adults may also desire to leave a donation to family or to a nonprofit charitable organization.
However, there may also be a family who will struggle with the loss of income. Families generally need income replacement for at least a few years, if not longer. This income enables the family to continue to cover the mortgage or rent payment, general living expenses, and even help with the children’s educational expenses.
If the married adult was a stay-at-home parent, there may not be a loss of income, but the family may still struggle financially. The surviving parent will need to adjust to the loss of the other parent. If the work schedule is not flexible enough, there may be a cost to covering the tasks that are no longer covered by that parent.
For example, a housekeeper may be needed to help with cleaning, laundry, grocery shopping, and meal preparation. There may be a need for child care during work hours, or someone to help transport the children to their extra-curricular activities after school.
Retired and/or widowed
In the later years, life insurance is usually less important. While final expenses should still be covered, and there may still be a desire to leave money to family or to charity, the need for funds to cover debts and living expenses should be minimal.
In retirement, there is no need for income replacement because there is retirement income to live on. Ideally, it should be enough to continue to pay the survivor’s living expenses and any remaining debts.
Life insurance requires proper planning at each of the life stages. As our lives change, our needs change. It is important to review our coverage as we transition through these stages to ensure that our families are able to grieve without the additional stress of worrying about how to take care of the financial issues we leave behind.
Ozeme J. Bonnette is a financial coach, speaker, and author of Get What Belongs to You: A Christian Guide to Managing Your Finances. After working for a top financial services company, she shifted her focus to speaking to groups hoping to increase financial literacy. She earned 3 Bachelor’s degrees at Fresno State, and her MBA at UCLA’s Anderson School. Her blog is http://www.povertynorriches.com. Reach her at firstname.lastname@example.org.