VOL. 126 | NO. 33 | Thursday, February 17, 2011
Rays of Wisdom
Dana and Ray Brandon
Ample Life Insurance Says ‘I Love You’
RAY and DANA BRANDON
Ray’s Take: With employers cutting benefits and families tightening budgets, more adults are foregoing life insurance or reducing coverage.
This is alarming because insurance is usually an important part of a comprehensive financial plan. Most people understand that breadwinners should be insured to compensate for loss of an income if there is a death. But there other scenarios to consider.
Amply insure a stay-at-home spouse.
Families often underestimate the value of stay-at-home-spouses when thinking about life insurance. While the homemaker may not generate income, his or her death can dramatically impact future expenses.
If a stay-at-home parent passes, the services he or she performed will have to be eliminated, purchased from a professional or provided by the remaining parent. That means additional costs for childcare, housekeeping, transportation, etc.
Moreover, the remaining parent may have to change career tracks, possibly earning less, to care for family.
Insure for the loss of both parents.
While it’s uncommon for both parents to die, it’s an important scenario to plan for. A will establishes who will raise the children, but insurance is necessary to fund the care. Unless the guardian is very wealthy, the additional expenses for food, clothing, child care, and education can be crippling.
Singles should insure debt and funeral costs.
Singles may also think they don’t need life insurance. After all, if no one relies on their income, why bother?
Consider this scenario. You’re single with a $250,000 mortgage, a $25,000 auto loan and $7,000 in credit card balances. Upon your death, the loan and credit card companies demand immediate payment from your estate, which is being handled by your parents.
So your parents are grieving, paying the funeral bill, and debt collectors are clamoring for $282,000. In the long run, your parents may not be held responsible, unless they co-signed for the debt. Nonetheless, it’s an unnecessarily stress-filled situation.
Life insurance would enable your parents or heirs can pay for the final expenses and your debts. Then they can sort out the property on their own time.
A common scenario is that a single person delays getting insurance until it’s needed, only to find that a health issue makes coverage too expensive. It’s better to have inexpensive and convertible coverage earlier on.
Dana’s Take: Yes, life insurance costs money. Yes, it’s another item in your monthly budget. But life insurance is the responsible way to go. No pun intended.
Life insurance tells the people you care about most that you were thinking of them all along. It provides them with the space and time to grieve your passing without the frustration and resentment of having to clean up financial messes or panic over their financial future.
Ray Brandon is CEO of Brandon Financial Planning (www.brandonplanning.com). His wife, Dana, has a bachelor’s degree in finance and is a Licensed Clinical Social Worker (LCSW).
Contact Ray Brandon at email@example.com.