The costs that surround a death can be staggering. It is not unusual for funeral and burial costs alone to soar over $10,000. In fact, it is quickly becoming the norm. Combine this cost with the loss of income, medical bills, or other bills surrounding a death, and a surviving family’s finances can quickly spiral out of control. Now, the surviving family members are not only burdened with grief, they are also saddled with worry and stress over how they are going to survive. The fact is that much of this added grief is unnecessary and can be prevented with the simple act of purchasing life insurance.
Why Should I Worry About Buying Life Insurance?
Life insurance is something that working age adults, particularly those with families, should not be going without. This is especially true because it is relatively cheap to buy. I recommend that everybody under the age of 55 buy a 30-year level term policy. For many adults, you can purchase over $100,000 in coverage for less than $20/month. At that rate, it is almost absurd not to buy it.
Not only can life insurance pay for your final expenses, but it can help to replace your income as well. Furthermore, it helps to provide your family with a financial cushion, just incase they feel unable to return to work immediately. It is cheap, provides protection for your family, and will help to secure their financial well-being should you pass away. It seems like a no-brainer, doesn’t it?
Do Young Adults Really Need Life Insurance?
Many younger adults wonder if they really need to purchase life insurance. Since they don’t have a family, is insuring their life really necessary? Besides, they are young. They are immortal. They are never going to need life insurance anyway, right? Unfortunately, I’ve learned from both personal and professional experience that young people die a lot more often than anybody would like to think.
For some young adults, it may in fact be true that life insurance is unnecessary. If you have enough money saved so that your burial expenses are paid for, you may not need to carry it. However, for the majority of younger adults, life insurance is a necessary protection for their family (parents, grandparents, etc.) as well. Why?
Let’s assume that the unthinkable has happened, and you – a 24-year old recent college grad – died in a car accident. You financed the new car you bought shortly after your college graduation – an education that you also financed using student loans. Since you likely have a limited credit history, chances are that somebody in your family had to cosign those loans for you. Unfortunately, those loans don’t just go away and the responsibility of paying for them will fall to your cosigner. So now, your family is not only burdened with the grief of your death, but they are also saddled with the pain of your debts as well. If you are responsible enough to be living on your own, you should also be responsible enough to protect your family and carry some life insurance to cover your debts.
Our Life Insurance Coverage
When we bought our first house, I purchased a 30-year level term policy that provides $250,000 worth of coverage for less than $20/month. In addition, we pay a few extra dollars a month for a “return of premium” rider. That way, when the policy expires in 30 years, we get the benefit of having our premiums returned to us. In that way, it is similar to a whole life policy (which doubles as a sort of savings account), but for much less expense.
Why Term Life Insurance is the Right Choice
My family chose to purchase a 30-year term policy for both myself and my wife. Why? The reasons are simple. First, you can buy a heck of a lot more coverage for a much cheaper cost. Second, my policy will expire around the time that I turn 55. By that time, I figure that I should have plenty of savings available to keep my family comfortable. If I don’t, then I haven’t done a very good job of managing my finances. At that time, I plan to take the money I have been paying toward life insurance and use it to fund a long-term care policy. At that age, I am much more likely to need a long-term hospital or nursing home stay. I’ll use this to protect my family and their finances in much the same way that I use my life insurance coverage now.
How Much Life Insurance Coverage Do I Need?
While financial luminaries like Dave Ramsey recommend that you should have coverage equal to 10 years worth of salary, we have decided to go with a little bit less than that amount. At the time that we purchased our life insurance policies, our death benefit covered all of our assets and more. Now that we have children and a bit more net worth, we have considered increasing our coverage amount. However, since we will be debt free in less than 3 years, we’ve decided against it. The house will be paid for, and my family could comfortably live off of my wife’s salary. So, while 10 years salary may be a good rule of thumb, you need to decide on the amount of coverage that is right for you based on your specific needs and goals for your coverage.
Unfortunately, death will come for all of us. Often times, it comes when it is least expected. Purchasing life insurance is the best way to make sure that your family’s financial well-being is protected. Really, it is so cheap that there is no good reason not to have it. So, if you aren’t protected, make sure to go out and find some term insurance today. Trust me, your family will thank you for it.
Jon Emge is a Senior Advisor and Content Manager at www.Lifequotes4u.co.uk. Jon is originally from America who moved to Liverpool because of his love for the Beatles. He is a published author and has assisted and advised clients on personal finance. In his spare time he enjoys listening to music, going to the odd festival and practicing his poetry skills!