Finance

Who Needs Life Insurance? Find Out If You Do.

Who Needs Life Insurance? Find Out If You Do.

September is Life Insurance Awareness Month and I want to do my part to help promote this often overlooked need. As a Certified Financial Planner (CFP®), life insurance is a topic I discuss with all my clients. Many would prefer to avoid this discussion, even though we all know death is one of life’s certainties. What isn’t certain, however, is when we will die.

Many years ago, I had a client who would listen every year as I pointed out his need for life insurance and then politely decline. One year, he finally decided it was time and purchased a policy. Shortly thereafter, he was diagnosed with cancer and was only expected to live a few more months. I was devastated, knowing that he would leave behind a young wife and family, but also relieved that he protected what I knew meant the most to him.

I had a chance to see him one last time before he passed away. Before I could even speak, he said, “Thank you.” He thanked me for not giving up on him and allowing him to give his family one last gift: the gift of financial security. They would not need to move out of their home. The girls’ college education would be paid for. Their lives would forever be changed, of course, but money wouldn’t be a struggle for them and that give him great peace.

I’d like to help give you the peace of mind of knowing your family is protected too.

Who Needs Life Insurance?

Many people view life insurance a bit suspiciously and too many willingly gamble that won’t need it. Here’s some food for thought: You don’t buy life insurance for you. You buy it to protect your loved ones.

Married Couples Without Children

Some argue that life insurance is unnecessary until you have kids. I disagree. Here’s why. Whether you and your spouse make a little or a lot, you likely live off that amount. Meaning if tomorrow, half or more of your monthly income disappeared, you would probably not be able to cover your living expenses without dipping into your emergency fund to offset the loss ongoing. Certainly some expenses decrease (i.e. food) but your rent or mortgage stays the same and that is typically your biggest monthly expense. You can, of course, downsize, but that typically doesn’t happen overnight either, or you may prefer to keep your home too. You also inherit joint debt, which now you have to pay on one salary.

Married Couples with Children and Single Parents

The same reasons from above apply here with one big additional reason: protecting your kids. You want to make sure their needs are meet and to give a surviving spouse or guardian the means to take care of them.

Parents with Disabled Adult Children

This is incredibly important and goes beyond having life insurance to cover their expenses. You are your child’s biggest advocate and I encourage you to work with an estate planning attorney and your financial advisor to put things in place to make sure they receive the care they need and deserve in your absence.

Please note: if you are taking care of a disabled parent, you should also take steps to protect them as well.

Young, Single Adults

Many single, young adults don’t believe they need life insurance, but I will give you four reasons why you might.

1. You Have Co-signed Debt

When a single person typically dies, their estate goes towards their debt and if there still is any outstanding debt, it is typically forgiven, which is why many single people believe they don’t need life insurance. However, if you have co-signed debt (your parents co-signed your student loan, car, mortgage, credit cards), they will inherit that debt.

2. Your Parents (or others) Rely Financially on You

We don’t talk about this often, but there are many older parents who rely on some financial assistance from their kids. And I don’t mean help with long-term care expenses (although that happens frequently too), but with basic care needs, like buying groceries and paying for utilities. If you currently help your parents or you suspect you will need to in the future, you need to consider what will happen to them if you are not there to provide assistance.

3. Your Funeral Expenses

Funerals are not cheap ($7,000-$15,000) and paying for these expenses will fall to your parents. You can at least ease the burden a bit by providing the funds to cover this cost.

4. You Expect to Get Married and Have Children

If you’re considering term life insurance, generally the younger you are, the healthier you are, which typically means you will have a lower premium. If getting married and having children is on your bucket list, then it may make sense to lock in a low rate now. For most young adults, it only means forgoing a night out per month to pay for the premium. 🙂

You Own a Small Business

If you own a small business with a partner(s), you may want to insure your business partner’s life. This way you have the funds to buy their share of the business and keep it running if they should die unexpectedly. An attorney can help you set-up a buy/sell agreement with your partners and structure it properly.

Protect Your Most Valuable Asset — Yourself

It often baffles me why so many people overlook or outright ignore their life insurance needs. We insurance our health, our homes, our cars, our valuables and even our pets. Who pays for your home, your car, your valuable and your pets? You do. And what happens if you are no longer here to provide for your family or able to earn to income? You are your most valuable asset. I hope you make the smart choice to protect it.

Shannon

The Heavy Purse Store is now open! My new downloadable Money Club Workbooks are now on sale. Each workbook provides five targeted lessons to help you raise Financially Confident Kids. Please check them out in The Heavy Purse Store.

September 10, 2014  •  18 Comments  •  Finance

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  1. Wednesday, September 10th, 2014
    I did not think about life insurance near as much as I should until I became a financial planner, now I am passionate about it, especially for couples and absolutely for people with kids. None of us has a crystal ball and knows are future and something unfortunate could truly create massive amounts of financial stress on top of the personal loss. I happily pay my life insurance every month knowing that my hubby and son will have one less thing to worry about if something were to happen to me.
    • Shannon Ryan
      Thursday, September 11th, 2014
      Being a financial advisor changes your perspective on many things because you see everything. And the difference life insurance makes is huge. Like you, I happily pay my premium every month because I know that my family will be okay financially if anything happened to me or Chris.
  2. Wednesday, September 10th, 2014
    I'm so glad to see you included the fact that young adults with cosigned debt need life insurance. All too often I see in the news a family who is struggling because of a tragic death of their child who had private student loans they were consigned on. This is so important!
    • Shannon Ryan
      Thursday, September 11th, 2014
      It's something many parents (since the are typically the ones who co-sign loans) don't think about. We may worry about being on the "hook" if they default on the loan or become delinquent with their payments, but we rarely consider about what happens if they die unexpectedly. Largely in part because it's something most parents can ever fathom happening, even though it can and does. If a child cannot afford or will not buy life insurance and you have co-signed debt with them, it may be wise for the parent to insure the child, especially if the loans are significant.
  3. Wednesday, September 10th, 2014
    As a young, single adult with absolutely no one relying on me now or in the near future, I'm still not sold on life insurance. In terms of funeral costs, would my assets be able to cover those costs?
    • Shannon Ryan
      Thursday, September 11th, 2014
      Maybe. Any debt you have will first be paid out of your assets. If I recall correctly (and forgive me if I don't), you do not have any debt whereas many young people do. So speaking broadly here, that always needs to be considered first. Will there be any assets left to be inherited? In your situation, it sounds like there will be no claims/limited claims (you will probably have some regular bills that will need to reconciled) and your assets will go to your parents or whomever you designate. The next question is whether your parents can afford to pay for your funeral while they wait to receive your assets. One of the many benefits of life insurance is that it generally pays out pretty quickly, unless there is something irregular and requires an investigation by the insurer. If you still prefer to let your assets reimburse the cost, then make it as easy as possible by keeping your beneficiary designations are up-to-date and having a simple will. The other reason to consider life insurance now when the need is probably at its lowest, is because you are so young and healthy. It's one of the catch-22's with life insurance. You can generally get the best rates when you probably need it the least. :) I hope this helped and let me know if you have any more questions.
  4. Wednesday, September 10th, 2014
    I have a college friend who just lost her husband this week in a motorcycle accident. I have no idea where she stands financially or if she even works, but they have two young children. It's sad, but things like that can happen at any time and it's so important to be prepared. That being said, I still don't think I need it if I'm single, have no debt, no one is depending on me (well except my cat), and I have enough money saved to cover funeral expenses, right?
    • Shannon Ryan
      Thursday, September 11th, 2014
      I'm sorry to hear about your friend's loss. You don't know what will happened, which is why it is so important to prepared against the what ifs. I'd say my answer to Stefanie applies to you as well. The difference for you is if you had to choose only one insurance - whether to consider life or long-term care.
  5. Wednesday, September 10th, 2014
    I'm not married and don't have kids or dependents so getting more life insurance is not on the cards yet. I have life insurance through work, which is not good enough, but since I don't really need it yet, it will do for now.
    • Shannon Ryan
      Thursday, September 11th, 2014
      At least you do have some life insurance, Aldo, to cover any debt you have may and your funeral costs. Life insurance through workplace benefits is often not portable, so when it comes time add coverage, you may want to consider a personal policy, not tied to your place of employment.
  6. Wednesday, September 10th, 2014
    Life insurance is super important. I know many people that don't have it and are older than me (37). Life happens, and it is best to be prepared.
    • Shannon Ryan
      Thursday, September 11th, 2014
      Sadly, it is something that many people overlook. We insurance so many parts of lives (sometimes without choice) but choose to not to insure what makes everything possible. It is best to be prepared because life for all it's wonder, can throw some very hard curveballs.
  7. Wednesday, September 10th, 2014
    Okay that's it, no more putting this off! I will put it on my "to do" list this weekend to sign up for life insurance. Hold me accountable, Shannon!
    • Shannon Ryan
      Thursday, September 11th, 2014
      I will hold you accountable, DC! I'm glad you and taking care of this and giving both you and Victoria peace of mind!
  8. Wednesday, September 10th, 2014
    Life insurance is such an important financial necessity. But so many people see it as such a waste of money. It is great that you brought up and set out the details on such an important issue.
    • Shannon Ryan
      Thursday, September 11th, 2014
      It really is a necessity and you are sadly right - too many people don't think they need it. I pay for it and hope I don't. I've seen too much and know what happens when someone dies unexpectedly and there is no life insurance.
  9. Sunday, September 14th, 2014
    These are some great reasons why we all need insurance. I have heard many excuses from friends and family as to why they do not need life insurance but it is not a gamble I am willing to take. I signed up for my first policy as a young adult when I jointed the military. I retired after 25 years and still to this day I have life insurance. I would rather have it and not need it right now than need it and not have it. We owe to the loved ones we leave behind in my view. Thank you for this wonderful article.
    • Shannon Ryan
      Monday, September 15th, 2014
      Thanks, Nate! Life insurance is something that so many people overlook or a willing to gamble on and it's just not a risk that I'm willing to take either. I'm seen the high price of not having life insurance and do not want my family to have to struggle financially if I should die unexpectedly.
Shannon Ryan SHANNON RYAN, CFP®
  • Meet Shannon

    "As a Certified Financial Planner, it is my passion to help individuals and families build a healthy relationship with money. I look forward to helping you raise financially confident kids.” - Shannon Ryan
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