Life is priceless. You can’t put a monetary value on the memories and emotions that you have experienced with loved ones; we are all unique and irreplaceable. It is, however, possible to calculate the financial impact for your surviving family if you passed away.
Most of my clients want their surviving family to be able to pay off debt, but it would only take a relatively small amount of life insurance to achieve this objective, so what’s missing? I remind my clients that they may also want enough life insurance to provide supplemental income for a specified number of years, send their children to college, and provide supplemental retirement savings since the deceased partner is no longer making retirement contributions.
Debt, supplement income, college savings, and retirement savings…. When you take all four into account, the calculated need for life insurance will most likely be a bigger number than you anticipated. But, there is good news! Life insurance has become relatively more affordable as life expectancy has increased.
I work with many types of clients, all with varying ages, family situations, occupations, and asset balances. Here are some of my typical responses during life insurance conversations:
- Lock-In your Insurability: “I’m young, single, with no kids. I don’t need life insurance.” You are as young and healthy as you will ever be, so you should purchase life insurance now to lock-in your insurability at the lowest premiums for which you will ever be eligible. Your family situation will change, and someday you will want life insurance. By locking-in your insurability at a young age, you will not have to worry about getting approved for a policy if you have any changes in your health. The reason why you purchase life insurance today can be completely different from the reason why you want it in the future.
- Portability: “I have group life insurance coverage through my employer. I don’t need a personal policy.” Most group life insurance policies only insure you while you are an active employee. With a personally-owned policy, the policy is portable, and you will maintain your coverage if you switch employers.
- Human Life Value: “I am a stay-at-home parent. I don’t need life insurance.” Most wage-earning partners would agree that their job is easier; being a stay-at-home parent is much more difficult. Raising children, managing a household, family transportation… these activities are often taken for granted, and it would cost a lot of money to hire a team to do all of this for your family. Full-time parents definitely need life insurance, especially if the wage-earning partner could not afford to quit their job to become a full-time caregiver.
- Needs-Based Planning: “I have significant retirement assets and available credit. My family will be fine.” Retirement savings accounts are for retirement, so if your family depletes all of your retirement assets to pay for everyday living expenses, how will your surviving partner ever be able to retire? Having available credit is not a valid reason. Lines of credit and credit cards will not be sufficient because debt has to be paid back (with interest), and accessing credit will definitely not provide enough money for your family. Build a needs-based financial plan, designate retirement savings for retirement, and purchase life insurance for family protection.
Do you have a plan for how your family would maintain their lifestyle if you passed away? If you still don’t think you need any life insurance for your family, consider being generous and leaving a legacy. Beneficiaries never complain about receiving too much from life insurance proceeds, but many beneficiaries complain that they didn’t receive enough…sometimes nothing at all.
September is Life Insurance Awareness Month. Please take the time to review your policies and determine if they are still appropriate based on your financial objectives. If you don’t have any life insurance or if you aren’t sure how to review your coverage, a financial professional can help. Financial professionals can help you calculate how much coverage you should have, how long the coverage should remain in-force, and the appropriate type of life insurance policy based on your specific objectives.
Take action today, and talk about life insurance with a financial professional. It could be one of the most important conversations you will ever have, and you are likely to feel a lot better about your financial planning when you implement coverage.
Insurance products from the Principal Financial Group® are issued by Principal National Life Insurance Co (except in NY), Principal Life Insurance Co. Securities and advisory products offered through Princor Financial Services Corp, 800/247-1737, member SIPC. Principal National, Principal Life and Princor® are members of the Principal Financial Group®, Des Moines, IA 50392. T1509160cin