The Real Impact of Not Having Life Insurance
Life insuranceÂ is one of the most reliable vehicles of financial security available, yet so many of us live our lives without ever purchasing a policy because we don’t understand theÂ importance of life insurance. There’s no doubt that, unless you’re family is financially independent, paying your final expenses is likely to be a huge strain on relatives if you pass away. Taking time to examine why purchasing a policy is a must can spare your loved ones the financial heartache of losing you.
Understanding Life Insurance Coverage
Life insurance coverageÂ is a financial tool that many Americans are aware of, but fail to purchase. In fact, according to the 2012 Genworth LifeJacket Study, more than 118 million adults in the United States (ages 18 and above) aren’t currently insured.
Americans do, however, consider it to be a valuable tool. A separate study conducted by ING found that three-fourths of consumers believe life insurance is an essential financial asset. Despite understanding its importance, some fail to purchase it because they may feel it is too expensive, or too complicated to understand, the study found.
A great way to understand more about life insurance is to run down how it works, the various types of coverage available and what it covers. To learn more, check out the following brief Q&A:
How Does Life Insurance Work?
Life insurance provides individuals with the cash (also known as a death benefit) necessary to cover a policyholder’s after-death expenses. The cash can replace the policyholder’s income as well as help the family left behind meet important financial needs, including funeral costs, short- and long-term living expenses and even college funding.
Who Needs Life Insurance?
Many people assume that the only ones needing life insurance are those with families. But in actuality, just about every circumstance could merit coverage. According to the LIFE Foundation, individuals in the following circumstances can benefit from life insurance:
- Married with children
- Single parent
- Stay-at-home parent
- Individual with adult children
- Small business owner
One would not think that every circumstance would call for life insurance, but again, unless you are financially independent, you’re leaving loved ones on the hook for thousands in funeral expenses and other final costs, which is why it’s so important to purchase coverage in almost every circumstance.
What Are the Different Types of Life Insurance Available?
Many people are accustomed to hearing aboutÂ term life insurance, which is the most affordable of theÂ different types of life insuranceÂ available. It is designed as a temporary financial solution, offering policyholders the ability to cover their families’ financial needs in the event that they die during a specificÂ time frameÂ (i.e. 10 years, 20 years, etc.).
Permanent life insurance, on the other hand, acts as a long-term investment. Whether you purchase whole, variable or universal life insurance, you are receiving protection, not only over a specific period of time, but over your entire life, as long as you pay your premiums.
Permanent life insurance also accumulates cash value that you can retrieve prior to your death, while still offering your family a death benefit after you have passed away, which for some makes this type of coverage a fantastic option.
What Does Life Insurance Cover?
Life insurance can cover just about any financial need you have. Whether you want to have money guaranteed to pay your funeral expenses and cover final debts you owe, or take over your mortgage payments to support your spouse in the long-haul, life insurance can cover it all.
If you purchase a permanent life insurance policy, your early life insurance premium payments can actually be used to pay premiums later in life. The key is determining what your financial needs are now and in the future (mortgage and car payments, debt owed, medical costs, taxes, college for the kids, etc.).
This will help you determine whether you should purchase a $100,000 policy or a $1 million policy, as well as whether coverage should be temporary or permanent.
How Much Does Life Insurance Cost?
One thing many people don’t know about life insurance is that a typical policy is not nearly as expensive as most assume. According to the 2012 Barometer Study released by LIMRA and LIFE Foundation, most people assume the average cost of a $250,000 term policy is $400 in annual costs, but in actuality, it averages about $150 per year (about $12.50 per month).
Of course, other circumstances determine the cost of coverage, including the amount of coverage desired, the age of the policyholder and the type of coverage wanted. But it’s good to know that it’s not as expensive as most people assume.
3 Stories Highlighting the Importance of Life Insurance
Now that you understand life insurance coverage a bit more, take a moment to examine stories from people who have experienced firsthand just how impactful life insurance (or a lack thereof) can be.
Travis Hess’ Story: Never Too Young for Coverage
Travis Hess was a man from a family with a long history of cancer. He had grandparents, aunts and uncles, as well as his brother and father die of cancer. His younger sister battled breast cancer and survived, and three of his five children were also diagnosed at young ages. It wasn’t until his daughter Alexis, only 3 at the time, died from a rare childhood cancer that he realized just how important life insurance is.
Travis did not have life insurance for Alexis, leaving him financially unprepared for not only her funeral expenses, but the medical bills left behind. Luckily, Travis received donations from friends and family that helped him cover Alexis’ final expenses. The experience was so impactful that he established the Hess Cancer Foundation, Inc., which provides financial assistance to families who have lost a child to cancer and need help with final expenses.
Robert Carmichael’s Story: Canceled Life Insurance Policy
Robert Carmichael was not unlike other parents who had to find ways to trim expenses, but one major difference in his circumstance was that he was cutting costs to pay for his wife’s funeral. The 40-year-old carpenter lost his wife due to complications during the birth of their third child. Instead of bringing both his wife and new baby home, he was the unexpected single father of three with a $9,000 funeral bill.
Carmichael noted that he and his wife Sue chose toÂ cancel a life insurance policyÂ a short time before she died. “We’re both young, and figured we could get by without it,” Carmichael told a local newspaper. Luckily, friends and family members organized a fundraiser to help Robert pay for his wife’s funeral expenses.
Kim’s Story: Father’s Debt Left Behind
A question posted on the blog Get Out of Debt revealed a family struggling to pay the debt leftover by a father with no life insurance. “My father passed away 1 year ago from cancer leaving my mother with a credit card debt of $18,000.00. There is no life insurance and my mother’s income is limited to $2,000.00 per month.”
Kim explained in her question that her mother was already strapped with an $80,000 mortgage and wasn’t sure how to manage the debt left behind by her husband. Unfortunately, the only recommendation for Kim’s mother was to file for bankruptcy, showcasing just how detrimental a lack of life insurance can be for families left behind.
From the stories above, it’s evident that life insurance has a true impact on the lives of families. Whether loved ones are able to provide assistance or not does not eliminate the fact that having life insurance coverage makes paying for final expenses much simpler.
Before experiencing firsthand what these families have gone through, it’s important to acquire your own coverage. Take the first step by securing a life insurance quote today.