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You Don't Have Enough Life Insurance

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Wednesday, May 13, 2015

You Don't Have Enough Life Insurance

You're a loving parent, spouse, and friend. In terms of life insurance, you're an even more valuable commodity -- the primary source of financial stability for your family. If you die, a life insurance policy won't replace the time and love you've committed to your family. The right policy will, however, replace the income you make to secure your family's well-being.

Unfortunately, most Americans don't have enough life insurance to protect their family from financial ruin. If you're part of the minority that even owns a policy, your average payout is a measly $167,000. If you die, your family would be lucky to get by for more than a few years with that reserve.

If you really want the best for your family, you need more life insurance. We've laid out your biggest excuses for avoiding life insurance, and why those excuses just won't cut it anymore.

Excuse No. 1: "Life Insurance Is Low On My List Of Financial Priorities"

If you're like 70% of Americans, you consider basic living expenses -- even Internet, cable, and electronics -- to be a higher priority than life insurance. Hey, we don't blame you. You'd rather pay the bills you owe now than worry about the bills your family might owe in case you die.

Instead of putting life insurance on the backburner, think of it as an essential living expense on par with utilities, rent, and groceries. Sure, in a best-case scenario, you won't die, and your family won't get a payout from your policy. But life insurance deals with the worst-case scenario. If you die without a policy, your family has to supplement your lost income and keep up with their other bills. Don't leave them vulnerable to financial devastation just because you opted out of the right life insurance policy.

Excuse No. 2: "It's Too Expensive"

While 63% of Americans assume the right amount of life insurance costs too much, they're also overestimating how much that "right amount" actually costs.

Consider the monthly life insurance premium for a healthy 35-year-old. To buy a 20-year term policy worth $1 million in payouts, he or she pays an average of $47 a month. To buy a $250,000 policy for 20 years, he or she pays just $19 a month. Considering your phone and cable bills run higher than either of those premiums, it's safe to assume you can afford enough life insurance.

Excuse No. 3: "I Have Life Insurance Through Work. I Don't Need More"

If you have employee benefits, you probably have some form of life insurance. But more often than not, work-sponsored coverage isn't enough. While Americans want their payout to equal 10 to 20 times the primary wage-earner's salary, most work policies only cover about three times an employee's salary. Plus, you can't keep an employer-based policy if you lose your job or retire.

Still think your employer-sponsored policy provides enough security for your family's future?

Excuse No. 4: "I'm Too Young To Buy It"

If you're young and have a spouse and/or kids, you have the biggest need for a generous life insurance policy. Younger families have lower salaries, smaller savings, more debt to pay off, and more time left before their kids are old enough to support themselves. If you don't have life insurance as a young parent, you're putting your family at risk.

Excuse No. 5: "I Just Don't Need It"

Yes, you do.

  • If you have debts, you need life insurance. Your lender might pass on your debts to a surviving family member, and they'll need help paying for what you still owe.

  • If you want to build on your retirement savings, you need life insurance. If you die early, and you don't buy a sufficient policy, your spouse will have to work twice as hard to secure their retirement.

  • If you have kids, you need life insurance. As we said before, you need a large enough payout to cover your kids until they're old enough to support themselves. If you want to make sure your kids can pay for college, you'll need to up your policy so they can secure a chunk of the payout for their college savings.

  • If you're a stay-at-home-parent, you need life insurance. Even if you're not the breadwinner, you take care of the house and kids. If you die, your policy would help pay for the cost of childcare and household duties that your spouse has to take over.

  • If you want to cover your mortgage or rent, your car loan, your auto and health insurance premiums, your funeral and burial costs, or another major life expense, you need life insurance. You don't want your family to lose all those privileges you've worked so hard to provide.

Here's the bottom line for buying life insurance: If you have any financial dependents, you need life insurance now.

"OK, Fine. So How Much Life Insurance Do I Need?"

To figure out how much life insurance to buy, calculate exactly how much income your family would lose if you died. Then look at how much your family spends each year for all major expenses: credit card bills, rent, mortgages, car loans, utilities, groceries, retirement savings, college savings, and more.

Finally, decide how many years you want your income and family living costs to be compensated. Now you have a general estimate of how much life insurance you need.
Most likely, that amount is much more than the policy you already have.

Once you're ready to buy a new policy, or add to your existing one, Insurance Clarity can help you.

After all, it's devastating enough for your family to move on without you. The least you can do is make sure they can afford to live comfortably, even long after you're gone.