Is Enough...Enough?

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As we all know, death, like taxes, is inevitable. As it turns out, it’s also as inconvenient, expensive and devastating when not prepared for properly – especially if it is unexpected (according to our unscientific poll, 57% of deaths are). Life insurance can help mitigate some of the devastation by easing much of the financial load placed on surviving family members. Life insurance, like any other choice has its risks and rewards. In the end though, how much is the surviving partner and/or children’s peace of mind worth?

Understanding how much life insurance is enough, starts with recognizing what your life situation is and what your financial goals are. Are you single without children? Are you “empty nested” and want to leave a charitable legacy? Are you a young family with littles just trying to keep a roof over your heads? There are policies that provide for every age category and lifestyle. Of course, the younger and healthier you are, the less expensive a policy is going to be, but don’t be dissuaded by age and or health status. If you’re willing and able to pay the premiums, you can be appropriately insured.

Next, figure out what your expenses and debts are now and what they could be in the future. Do you have student debt? Mortgage? Car loans? Are you interested in just being able to pay off debts? Are funeral expenses the only requirement you need to pay for? Do you have children at home, and are you wanting to help them with further educational expenses, or just their day to day growing up costs? Again, there’s a policy and reasonable premium suitable for all situations. Just don’t be the one left that tells the story of having no financial backup because the premiums were unaffordable. It is a matter of balancing what do you want for your family’s future and what can you manage now. Something is better than nothing. You can (and should!) up your policy amount as your income grows. There are many websites that can help educate you on what kind (term, permanent, business, burial etc.) to get. Regardless, it’s crucial you first know your current and future debts, expenses and goals.

If you are the main breadwinner and have dependents, the formula most financial experts suggest is AT LEAST 10x your income. Many suggest another 5-8% beyond that to account for inflation. Stay-at-home and part-time working partners should also be insured to ease the burden of taking over their contributions to running the household. Calculate the cost of hiring out what they do at home (childcare, tutoring, laundry, cooking, cleaning, yardwork, shuttling kids around, etc.) plus the loss of any income they generate and then use the same 10x formula to know how much to insure them for. In another post, we’ll discuss the basic costs of death and rebuilding a survivor’s life. Suffice it to say, if you haven’t experienced it, just know, it's much more than you think. Plan accordingly.

Of course, it’s difficult not only to think of death, but also how much a life is worth when it comes to financial planning. Obviously, we are all worth more alive and it’s important to recognize that no one is getting rich off a life insurance pay out. What those funds do is buy time. Time to figure out how to rebuild a new normal while grieving. Time to spend with your children as you help them grieve. There’s not a widow/widower we know who had sufficient life insurance that wasn’t full of deep gratitude for that time to heal. Conversely, we are also very familiar with the pain, resentment and anger that is experienced by survivors that didn’t get that opportunity. Just know that taking the time to figure out what you can do to get your affairs in order, the best you can in your circumstances and TAKING ACTION, is one of the most generous, loving gifts you can give your loved ones.

- Katie

Prepare Your Affairs Founders

ABOUT OUR FOUNDERS

Corey and Katie entered widowhood in 2016 after losing spouses to cancer.  They met and connected in a widow/widower support group and later married.  One of the principles they learned from their own experiences and those of other surviving spouses is that the more prepared a surviving spouse is on a financial, legal, emotional, and practical level, the better they will adjust to widowhood.  They will maintain their independence and control of their assets and be freer to properly grieve and move forward in life.  Conversely, those who are not prepared are more likely to have their lives flipped upside down.  They may need to move and uproot kids because they can't afford the mortgage, rely on family or other charities to financially support them, and/or change jobs to allow them to better serve as a single parent.  We hope to share what we've learned and help other families properly get their affairs in order and be prepared with confidence, peace of mind, and in control of their assets.