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The High Cost of Not Having Life Insurance

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Life insurance premiums aren’t cheap – but the cost of not having life insurance is far more. Despite this fact, it’s an all too common mistake and one of the few financial mistakes from which there is no hope of recovery.

Far too many families and small business owners overlook the foundational financial planning step of getting sufficient life insurance protection in place. According to LIMRA–– the organization formerly known as the Life Insurance Marketing and Research Organization–– the vast majority of families in the United States are substantially underinsured when it comes to life insurance, and a significant number of families have no insurance at all.

About 48 percent of American families are significantly underinsured, reports LIMRA, with approximately 37 million Americans who have no life insurance protection in place at all, and are at severe risk of financial impoverishment in the event of the death of a family breadwinner. Plus, one in five families with children living in the home are underinsured.

For those who have life insurance, the amount in place is all too often woefully inadequate. On average, their life insurance coverage amounts to $200,000 less than their actual need. The average family with life insurance has only enough to cover about three years of lost income/expenses, which is far shorter than what most insurance professionals recommend.

For surviving family members, a lack of life insurance sets them up for a series of devastating blows to their financial security and lifestyle: Not only are they at risk of losing a loved one and provider – a parent, husband or wife – they also lose every paycheck and every pay raise and promotion that their loved one would have earned throughout the rest of his or her working life.

The Cost of Underinsuring

In addition, without adequate life insurance in place, surviving family members are also at risk of losing the family home, losing prospects for college education, and being forced to move to a less desirable school district. All of which will likely have negative effects on their long-term financial and educational prospects.

At the same time, a recent survey shows that over six in ten Americans don’t have enough savings to cover an unexpected $500 expense. One in three has no savings at all.

But families have significant expenses to contend with when a loved one dies, including final medical expenses, which are often significant, as well as burial and funeral costs and the costs of travel to memorial services. Put together, the unexpected death of a loved one – especially a breadwinner – can stretch most family finances to the breaking point.

Insuring the Non-Working Spouse 

Don’t overlook the need for life insurance on stay-at-home spouses, either. Many families vastly underestimate the contributions a stay-at-home parent makes to the household.

On top of funeral and burial costs, the surviving parent often wants to take some extended time off work to spend with grieving children or travel to visit family. Once they go back to work, they will likely need to arrange for childcare services or after-school care, depending on the ages of the children. They typically incur more expenses from eating out, as busy professional single parents have less time available to prepare home cooked meals. The surviving parent may want to arrange for housecleaning services and pay for a surprising number of services that the deceased stay-at-home spouse provided.

The right amount of life insurance on a non-breadwinner is a personal decision, and varies widely – but the more thought people put into it, the more they realize the need.

Fortunately, term life insurance is affordable even for families just starting out provided they are in good health. The key: Don’t put it off. Putting off the decision saves very little money – and you risk waiting too long. A severe medical issue can make it difficult or impossible to get insurance at any price, so the sooner you get protection in place, the better.

If you think you might be underinsured or if you have no insurance at all, give us a call. We’ll be happy to provide you with a no-cost evaluation of your specific situation as it relates to your insurance needs.


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