What is the big fuss about life insurance?

Okay, first of all- if you are interested in seeing how much life insurance will cost for you- click here.

Sage Insurance Group is able to provide a variety of options, including policies that do not require a health physical.

Here are several situations that can be overlooked regarding life insurance.

1. If you are a co-signer for your college student’s education loan, you should make sure your student has life insurance.

Why?       Because (god forbid) if something happens to your college student, you are responsible for their loan.

Think about this.  Your child passes away- preceding you in death, which is traumatic enough.  In some cases, you may even need to help raise children when this happens.

If they did not have life insurance to begin with, you have had burial expenses and funeral expenses to handle.

Depending on the type of student loan (not all of them), the debt is now yours, just like co-signing for a mortgage or car loan.

Most people understand that co-signing means that if the other party misses a payment then they are responsible for it; but usually no one considers that the other party could die unexpectedly in a car accident, by getting a disease, or having some kind of other traumatic event.

You could owe tens of thousands or even hundreds of thousands of dollars.

If you can’t afford to pay, some loans even have clauses in the fine print that specifically state that you are not allowed to have the debt forgiven via bankruptcy.  Other debts can be discharged if you file bankruptcy, but not (some) private student loans.

Purchasing an inexpensive term life insurance policy for at least the amount of the student loan covers this risk.

 

2. You only have life insurance through your employer.

Why?       Because you don’t own the policy.  If and when you leave your employer you don’t get to keep it.

The average person changes careers 5-7 times in their lifetime.

Let’s work out an example:

You go to tech school and become a welder.  You are hired on at a shop when you are 21 and take the employer-sponsored life insurance.   But eight years later, when you are approximately 29, you are offered a higher-paying position someplace else that you believe is a better fit so you change jobs.

By this time, you are married, have two children, and just purchased your first home.  You decide that in addition to the $50K life insurance, you should probably buy another life insurance policy for a larger amount in case something happens to you.  You want to make sure your spouse can afford to keep the house and your children are taken care of.

All other things being equal- a life insurance policy that you purchase at the age of 22 is going to be a lower price than a life insurance policy that you purchase at the age of 30.

And, what are the odds of everything else being equal?

The average American gains 18lbs (a permanent 18lbs) between their 20s and 30s.  Your BMI is a factor in your rating, in addition to your age.

Additionally, the odds of you coming down with a chronic condition as you get older become more and more likely.

 

3. You should get life insurance on your child.

Why?        No one wants to think about their child dying.  Especially if they are little.  Buying life insurance makes you come face to face with the reality that your child may precede you in death for one reason or another.

However, the fact of the matter is that you cannot protect your children from everything.  You may think you can.  You may want to.  But the reality is that sometimes painful things happen.

Sometimes painful things happen and they come with financial burdens, such as final expenses that you never thought you would have to think about- especially in your own younger years when you are still getting established yourself.

In addition to having those additional financial burdens on your family, you’ll likely have immense emotional burdens.  Personally, I would be an all-out wreck if anything happened to any of my children.  While many employers might give up to one-week of bereavement leave for a child (paid), can you afford to go without pay if you need longer than a week before you face working again?

There is not a set timetable for grief- and having the cushion of some life insurance allows you to avoid the stress of having a deadline of returning to work.

Especially if you have already used up some FMLA or PTO sitting with your child in the hospital before they passed.

    • Additionally, life insurance money can also help pay for relatives that live further away travel to come to the memorial service (ie. Aunt Kathy who needs to fly in from California who otherwise would not be able to come).
    • Or your child might develop a condition that prevents him or her from getting life insurance later on in life (or would make the price wicked expensive).  Purchasing a policy (either a long-term life or a whole life) early on while they are young and healthy means that if they develop cancer at the age of 14, they will still have that insurance policy when they turn 25 and get married and have a family.
      • Same with the fact that their motor vehicle record also impacts their price later on.  Once they turn 16 and possibly get a few tickets or in a few accidents- their price will drastically be impacted; however if you have already purchased them a policy, the price is already set.
      • Again- the same with if they decide to get into some crazy stuff.  My 21 year old son started jumping out of airplanes for fun once he turned 18.  Life insurance companies tend to give the side eye to this kind of thing-  apparently that is a higher risk category (laughing).  Trust me, they will thank you later.
    • Some insurance policies have living benefit riders- which means if your child – at any time they have this policy- as a juvenile or an adult- is diagnosed with a terminal disease and has less than a year to live, can use a portion of their policy’s value for things like fulfilling their bucket list or experimental treatment not covered by insurance.

If you are thinking to yourself that there is a pretty slim chance that anything could happen to your child, I’m going to play devils advocate here.  My apologies for the scary stats.

        • From 2021 to 2022 the National Vital Statistics System reported that the death rates for Americans aged 14 and up all decreased; but the age specific death rates for 1-4 and 5-14 year olds increased  by 12% and 7% respectively.  Children are dying at the highest rate in 13 years.
        • In 2021, roughly 7 children under the age of 18 died from firearms alone.
        • In 2020, roughly 5 children under the age of 18 died from homicide.  3/4 of the 1,813 child homicide deaths that year were caused by firearms.  Firearms-related child homicides rose nearly 48% from 2019 to 2020.
        • In 2023, an average of 22 US teens died from an overdose every week.
        • In 2020, an average of 22 people aged 1 – 24 died from a motor vehicle accident every day, 3 died every day from drowning,  everyday from intentional injuries/suicide,

Bottom line:  Struggling emotionally from someone’s loss is kind of a given.  Struggling financially doesn’t have to be.

4.  You are a stay-at-home parent.

Why?        Think about all of the tasks a stay-at-home parent does.  How much would it cost to replace them?

There seems to be this unspoken idea out there that life insurance should cover the “breadwinner” in the family.  Whether it is a dual-income family (two life insurance policies) or a single-income family (one policy).

This is very faulty logic.

Consider this scenario:

Mom works and has life insurance.  Dad stays home with 3 children ages 2, 3, and 5.  The five year old is in preschool that costs $200 / week.  The 3 and 5 year old are in tumbling classes and dad goes on an “adventure” every week with the two younger children so that they can have some exposure to different children’s museums, trampoline parks, play-groups, etc.  He also keeps the house clean, does the grocery shopping, runs the errands, and takes the 5 year old to and from preschool.

Dad passes away unexpectedly without any life insurance.

      • First, mom has to pay for his final expenses out of pocket
      • Second, mom has to take time off work (possibly days past paid bereavement time)
      • Third, the younger two children have to be put in daycare (extra $2000 / month)
      • Fourth, she either has to rearrange her schedule or hire someone to drive the children
      • Fifth, since she is now even busier than before, she hires a housekeeper ($$)
      • She finds that she is having trouble finding the time to grocery shop, especially with three young children and no time by herself- so she uses grocery delivery services ($$$)
      • She eventually hires a nanny to fill in the gaps ($$$$)

Back up the train…  she can’t really afford to do all of that- unless her job actually pays really well -or- purchasing life insurance on Mr. Stay-at-home Dad could have paid for all of these additional expenses.

Lesson learned:  Stay-at-home parents may not bring in an income; but the money they are worth to the family’s financial bottom line is significant.

 

There are many, many more example situations where people often don’t realize that life insurance may reduce a financial burden down the road.
Often times, it costs less than you think.  Even if you have a medical condition or are tipping the age scale.

Let us know that you want to explore your options!