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Life Insurance

There is no doubt that the need to protect against the loss of a family’s main source of income is an integral part of providing surviving family members with a financially secure future. However, for many families, life insurance coverage begins and ends with the primary breadwinner.

It’s relatively easy to recognize the financial impact a family would suffer if its primary source of income was taken away. Less obvious, however, is the financial impact of the death of either parent or a child who doesn’t earn an income.

Life insurance is a sound risk management tool and appropriate for any individual whose death would cause a financial loss to a family. Although a stay-at-home spouse may not earn income, the value provided to the family is, in many ways, immeasurable. Even so, there are real costs a newly widowed parent will likely face if a spouse were suddenly gone.

For a parent, losing a child is probably the worst possible scenario imaginable. Just the thought of it can be more than some can bear. However, taking steps to prepare for the financial impact of such an event can help ease the burden if such a terrible loss were to occur.

Here are some reasons it makes sense to insure family members who aren’t the primary breadwinners:

Child Care

The death of a stay-at-home parent will likely trigger an immediate need to find and pay for childcare. This can be a sizeable expense if the children are elementary school age or younger.

Final Expenses

Funeral and burial expenses can average between $5,000 and $25,000 or more depending on the type of arrangements. And, if the family member who has passed was ill for an extended period of time, there may be significant medical bills, debts or other unexpected expenses to pay.

Recovery Period

A surviving spouse or parent may need to take time off from work to get things back on track and, in some cases, allow time for a job search, or training in a new career or field to support the new family dynamics. Insurance proceeds can also help pay for any counseling that may be needed by surviving family members.

Future Insurability

One of the most important reasons to insure children is to guarantee they will be able to have life insurance as adults, regardless of their future health or genetic blueprint. This is especially important when there is a family history of disease or illness or, in the case of adoption, where the family history may not be known. Having life insurance in place now on a stay-at-home spouse ensures he or she will have protection down the road when and if it is needed for estate planning, charitable giving, education costs or even income replacement if returning to work is a future possibility.

Leaving a Legacy

Many bereaved families have found comfort in providing a lasting remembrance of their lost loved one by making a substantial gift to charitable, educational or other organizations. Proceeds from a life insurance policy can even help surviving family members establish an ongoing memorial or scholarship fund in honor of their child or spouse.

Future Financial Asset

While the insurance protection is the primary reason to purchase permanent life insurance on a child, the accumulated cash value in a permanent life insurance policy may grow to be quite significant at adulthood. This cash value can be drawn on to pay for educational or other expenses. Since withdrawing the cash value will reduce the available protection of the life insurance policy, you should discuss any withdrawals with a trusted advisor.
Having life insurance on all family members is one way to protect against the risk of financial loss while, at the same time, helping secure a bright financial future for the entire family.

If you have a family to protect, a sound life insurance program is the perfect solution. There are two basic types of life insurance needs: temporary and permanent.

Temporary

needs include home mortgages or short-term debt reduction, family income and educational expenses and can last as little as one year or last 20 to 30 years or longer. Term insurance is the most cost effective method of insuring many short-term needs. There are a variety of plans to choose from, ranging from an annual renewable term (1 year plan) to a level term plan that could last 5, 10, 20 or 30 years.

Permanent

needs include those that last for your entire life or potentially for periods of 15 years or more. Permanent insurance needs include final expenses, funds the cover estate taxes and retirement savings protection. Permanent and universal life plans are ideally suited for meeting these goals.

The primary purpose of life insurance is to provide cash for your family in the event of your death to ensure that they can remain in their home and continue to maintain an adequate standard of living. There are a number of factors that determine the cost you pay for life insurance including:

  • Age
  • Health
  • Tobacco Use
  • Occupation
  • Hobbies
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