Life insurance is an investment many people neglect to make. The reasons for that are many, including:
- Thinking it’s not affordable.
- Making other things a higher priority—like eating out at fancy restaurants once a week or mall shopping sprees.
- Feeling uneasy thinking about death.
- Not realizing how much their families might struggle financially if they were no longer around to help make ends meet.
That last bullet point, in particular, is worth homing in on because it’s ultimately what life insurance is all about. Would your loved ones be able to pay their bills and live a comfortable life if you passed away and your paycheck was no longer there to help support them?
Maybe? Maybe not?
Something to Consider
If you’re not sure, here are some statistics and information that will help you understand why life insurance might be more important than you think.
- The median cost of a funeral in 2012 was $7,045, according to the National Funeral Directors Association. That amount doesn’t include the cost of a monument, cemetery fees, and the approximately $1,000 for a vault. And funeral rates are trending upward.
- The average car loan is over $27,000 according to an article in 2014 on CNBC.com. Even if your family doesn’t have a car loan now, vehicles don’t last forever. They may need to finance the purchase of one in the future.
- I recently used CNN Money’s online college cost calculator to see what it might cost to send my daughter to the university I got my B.S. degree from. The current total annual cost (excluding grants and scholarships) for in-state tuition, fees, and room and board is $24,587 per year.
Use the calculator to see what it might cost to send your kids to college. I’m betting you’ll be surprised at the chunk of change required.
- According to the Henry J. Kaiser Family Foundation’s “2014 Employers Health Benefit Survey,” the average family coverage premium for health insurance is $1,403 per month or $16,834 per year. And then there are the out-of-pocket costs for doctors’ appointments, medication, and treatments for conditions to consider.
As you can see, your family will likely have a lot more to contend with beyond other expenses like:
- Heat and electric bills
- Mortgage payments
- Gasoline and car maintenance
- Pet care
- Leisure activities
What’s really scary is 26 percent of Americans have no emergency savings, according to a Bankrate.com survey in June 2014. If you’re one of them, it’s not hard to imagine that your family would have a difficult time taking care of all their financial obligations after you’re gone.
A Case for Life Insurance
Of course, we can’t ignore the fact that life insurance does cost something. Yes, you will need to pay premiums and that may mean making some minor adjustments to your budget. The good news is life insurance is probably less costly than you may believe. The Life Happens and LIMRA 2014 Insurance Barometer Study found that people without life insurance believe it’s three times more expensive than it actually is.
Term life insurance in particular offers coverage that you might find surprisingly affordable. Term life policies give you flexibility options in both the amount of coverage you can get and for the amount of time (the “term”) that coverage will be in effect. Typically, terms are 10, 15, 20, 25, or 30 years. You can even get policies for as short as one year or five years. The shorter the term, the lower the premium. After you’ve estimated your family’s financial needs to cover expenses and live well in the future, you can get a preliminary term life quote online or talk with a trusted term life professional about your options.
Whatever your reasons for not having life insurance, you may want to give it more thought after reading the stats and information I’ve shared here. How well would your family be able to manage financially without you?