Life Stages.Insurance

Simply put, if you have people who love you and depend on you financially, you need life insurance. This is a very difficult subject to talk about because very few people feel comfortable enough to talk about death. In fact, I was sitting down with a family in Fontana, CA and the spouse was driven to tears just thinking about losing her loved ones. Even though life insurance is not fun to discuss, that fact does not diminish the need to prepare for the inevitable.

Life Insurance Serves Many Purposes

Throughout your life you will experience different phases in which life insurance can fulfill a specific purpose. The following examples illustrate the various uses of life insurance.

Single People

People who are not married and have no kids do not typically consider life insurance as a need. However, if you are providing financial support for aging parents or siblings who lack the ability to care for themselves, you should consider life insurance. Unfortunately, some debt passes to your family members, but money from life insurance is not considered part of an estate so it is free of estate taxes.

Married Couples

After the 1950s, families needed dual incomes to get ahead financially. If a wife makes $50,000 a year and the husband makes the same, chances are the family is living at least a $100,000 lifestyle. If one spouse unexpectedly passed away, the family would suddenly have to survive on half the income. Funeral Expenses, plus all of the existing expenses such as credit card balances and outstanding loans that are still in both names still have to be paid.

Parenthood

Raising a child is sometimes the most difficult and rewarding challenge that parents will encounter. Baby formula, baby food, diapers, clothes, toys, and college are a few of the many expenses for parents regardless of socioeconomic status. The US Department of agriculture estimates that the average cost to raise each child is $235,000 (not including college). If your income suddenly stopped upon your death, would your spouse be able to provide your children with the same lifestyle that the two of you always dreamed about? How would you pay for their sports, dance, and college? If you are a single parent, how would your passing away impact your household?

Homeowners

The title of home ownership is a misnomer since a home cannot technically be owned until mortgage payments end. Life Insurance can be used to pay down partial or full mortgages. Some companies offer life insurance policies that equal the number of years remaining on a mortgage. For example, if a mortgage has 28 years left, some companies offer 28 year term life insurance policies. Besides the strictly practical use for life insurance, a family who receives a death benefit can also use the money to maintain their existing lifestyle.

Retirement

If the pitfalls of life never visited you during the early years, consider yourself lucky. Now that the kids have graduated and they have stable incomes, and your home is paid off, people have perhaps taught you that there was no longer a need for life insurance. That stated, what would happen if you died today? Would your spouse have enough money to maintain the same lifestyle for 10 to 20 yrs? Contrary to popular belief, this is the best time to have had life insurance with some cash savings. Structured properly, you can begin to live on the compounding interest that has accrued over the years. Term insurance during this phase of your life gives you peace-of-mind, and cash value life insurance gives you lifestyle. What is so great about insurance is that you can’t lose. It’s a fixed fight. If you die too soon, your family is going to benefit financially by maintaining their current standard of living. If you save and survive, you put yourself in a position to have more money to spend during retirement.