Life insurance: You need some, here's why

Life insurance: You need some, here's why

Life insurance is not an issue that most people want to talk about. The thought of you or a loved one who is no longer there does not make a good dinner conversation. But it is a reality that we all have to deal with. According to the latest study by the LIFE Insurance and Market Research Association (LIMRA), only 60 percent of Americans say they have life insurance.

life insurance

This is a big problem, because without life insurance, many families end up with financial burdens. With no money to bury loved ones, many now rely on GoFund Me pages. Fortunately, all this can be solved with a little planning. That is what I want to help you today.

But first, imagine that really quickly...

Janene and Max are in their late 30s. Both have great tasks in technology and care. They are proud of their education and the fact that they have provided a decent amount of money for future emergencies.  They do not spend more than necessary; however, they love to keep up with the new technology.

Every new iPhone that comes on the market is in hand before the end of the release date. They love their iPads and MacBooks as well as their twin daughters Chelsea and Camilla.  They don't think twice about it, they always make sure that all their devices are insured.

They have the typical types of insurance that most Americans have – car, homeowner, and health insurance. However, your life insurance situation leaves much to be desired. 

Janene has a life insurance policy worth 25,000 US dollars through her job and Max has a life insurance policy worth 50,000 US dollars through his job.  They have no insurance for their children, according to the old advice that young children do not need life insurance.

Max numbers, since they have insurance through their work, they have at least enough to provide each other with a decent funeral. The girls also have 529 accounts they rely on, whether something would happen to him or Janene before they go to college.

On a weekend, the girls had a cheerleading contest in Charleston, about 200 miles from their home in Rutherfordton, NC.   Janene took the girls to the event. Max travelled separately due to work commitments.

It was rainy this weekend and the school bus was on top of the pitch with trainers, cheerleaders and parenting staff.

About 30 miles south of Columbia, the rain really began to pour. The nearest stop was about 45 minutes away. The chief cheered car encouraged the bus driver to get over the side of the road until the rain subsided.

The driver and the coach thought they would be safer on the side of the road until visibility improved, but they never expected an 18-wheeler to race down the highway. The truck driver was too fast and lost control of the truck after one of its tyres went off.

While they were sitting on the side of the road waiting for more favorable driving conditions, they were sitting in harm's way as the truck rolled towards them.

I will end this little story there and allow you to come to your own conclusions.

One can be optimistic and conclude that Janene and her two daughters got away with only a few scratches. Or you can believe the alternative. The alternative would unfortunately come to the conclusion that Max will not only be emotionally upset, but that he will have a hard time recovering financially as he prepares to bury his entire family with an inadequate insurance sum.

Regardless of what you decide to believe, the point of sharing is hopefully driving home the fact that we can't control what life throws at us. All we can do is prepare as well as we can. One way to prepare for everything is to save money and have the right form and the right amount of insurance.

Life insurance - What you need to know

After working in the insurance industry for the last 10 years, I recommend that young families take out life insurance. Why? Well, because it's affordable and it provides sufficient coverage to meet the financial needs of families when a primary breadwinner dies.

You may not think you have enough money in your budget to buy life insurance, but I'm here to tell you that you can't afford not to have life insurance.  Despite how tight you might think your budget is, imagine how tight things would be if you lost a source of income you've grown from?

Invoices will continue to come. Debt balances will continue to grow. And unfortunately, life will go on. Will you have the means to continue paying your bills? Do you lose your home without this one income? If something happened to both spouses, would their children be financially cared for?

Who should take out life insurance?

Everyone should have life insurance. Yes, even children. I keep hearing arguments about not buying life insurance for children because they are young. Unfortunately, we live in a world where parents bury their children all the time.

Similarly, all adults should have sufficient life insurance to cover funeral, debt and living costs for family members.  Everyone will be different, so there are many things you should consider, such as the amount of dependent, debt, etc — that we will discuss next.

How much life insurance do you need

According to the National Funeral Directors Association, adult funerals in 2014 were worth a hefty sum of 8,508 U.S. dollars. Not only will you need sufficient insurance to cover funeral expenses, but you will also need it to take care of your family and the remaining financial obligations.

If your loved one was sick or injured before death and needed medical care, you need money to pay your medical bills. If you and your spouse have a reasonable share of student loans, mortgages, and other consumer debt, you'll need money to pay off that debt.

Do you have children in college? If you have co-signed a Parent Plus loan, you are still responsible for paying that debt, even if your child dies. Many assume that a small policy towards their children will suffice, but having enough to bury them is not always the case when it comes to debt.

Most experts recommend buying 10 to 12 times the total combined income in life insurance.

Using Janene and Max as an example, Janene's salary was '65,000 and Max's salary was USD 110,000. This means that Janene should have between USD 650,000 and USD 780,000 in life insurance. Max was supposed to have 1,100,000 to 1,320,000 Us dollars. The idea is to have enough to cover this spouse's share of the debt and to replace her lost income for the coming years.

this article is adapted from this