• Life Insurance: Who Needs It?

    Posted on January 26, 2016 by in Insurance Articles

    Whether we admit it or not, we all make New Year’s resolutions. We may not call them resolutions, and we may keep them to ourselves, but I think we all start the year with a renewed commitment to things like healthier living, getting more exercise or spending more time with our families. Apparently many people also make a commitment to getting life insurance, because I get a lot of calls in January to find out about plans and rates.

    Who needs life insurance?

    I won’t come right out and say everybody needs life insurance, but if someone will suffer financially when you die, chances are you need life insurance because it provides cash to your family after your death. This cash is known as the death benefit and it replaces your income and can help your family meet many important financial needs like funeral costs, daily living expenses, paying off a mortgage, and getting your kids through college. Something else to think about–there is no federal income tax on life insurance benefits. Life insurance ensures that your family will continue to enjoy a quality of life if something happens to you.

    In the eight life stages below, we describe why you need life insurance:

    1. You’re Married

    Many people mistakenly believe that they don’t need to think about life insurance until they have children, but this is being shortsighted. What it one of you died tomorrow? Even with your surviving spouse’s income, would that be enough to pay off credit card balances, car loans, meet your monthly mortgage commitment and constantly rising utility bills? How would this change retirement planning for the surviving spouse? Something to be thinking about: if you plan to have children, consider buying life insurance now. First, you’ll be locking in to premiums at your younger age. Seconds, if there are any complications like gestational diabetes (very common for many pregnant women) you will already have a policy in place.

    1. You’re Married With Kids

    Most families depend on two incomes to make ends meet—especially here in the Bay Area. If you died suddenly, could your family continue to meet all their financial obligations—from paying rent or the mortgage to daily living expenses? Could your family continue their standard of living on your spouse’s income alone? What about plans for the future, including college for your children? Life insurance makes sure that your plans for the future don’t collapse when you do.

    1. You’re a Single Parent

    As a single parent, you juggle many roles, but the most relentlessly demanding roles are those of breadwinner and caretaker. An estimated 4 in 10 single parents have no life insurance, and many of those with coverage say they need more. With no fallback position and so much responsibility resting on your shoulders, you need to make doubly sure that you have enough life insurance to safeguard your children’s financial future.

    1. You’re a Stay-At-Home Parent

    Just because you don’t collect a paycheck doesn’t mean you don’t make a financial contribution to your family. Childcare, chauffeuring kids to activities, cleaning, endless meal preparation and cleaning up, along with other household activities are all important tasks, the replacement value of which is often severely underestimated. With life insurance, your family can afford to make the choice that best preserves their quality of life.

    1. You Have Grown Children

    Just because your kids have all graduated from college and the mortgage is paid off doesn’t necessarily mean that your need for life insurance has ended. If you died today, your spouse would still be faced with the escalating cost of living in the Bay Area. Would your financial plan, without life insurance, enable your spouse to maintain the lifestyle you’ve worked hard to achieve now and into retirement?

    1. You’re Retired

    Depending on the size of your estate, your heirs could be hit with an estate-tax payment of up to 45% after you die. The proceeds of a life insurance policy are payable immediately, allowing heirs to take care of these taxes, funeral costs and other debts without having to hastily liquidate other assets, often at a fraction of their true value. If properly structured, life insurance proceeds are also generally income-tax free and won’t add to your estate-tax liability.

    1. You’re a Small-Business Owner

    Many people don’t think of life insurance as having application beyond themselves and their immediate families, but life insurance can also protect your business. What would happen to your business if you, one of your fellow owners or a key employee died tomorrow? Life insurance can help in a number of ways. A life insurance policy can be structured to fund a buy-sell agreement. This would ensure that the remaining business owners have the funds to buy the company interests of a deceased owner at a previously agreed-upon price. That way, the owners get the business and the family gets the money. Without a funded buy-sell, businesses risk becoming partners with the deceased owner’s beneficiaries. To protect a business in case of the death of a key employee, key person insurance, payable to the company, provides the owners with the financial flexibility needed to either hire a replacement or work out an alternative arrangement.

    1. You’re Single

    We traditionally think of life insurance when there is a dependency—someone is counting on you financially. Most single people don’t need life insurance because they don’t have this dependency, but there are exceptions. Some single people provide financial support for aging parents or a sibling with special needs. Others may be carrying significant debt that they wouldn’t want to pass on to family members who survive them. Insurability is another reason to consider life insurance when you’re single. If you’re young, healthy and have a good family health history, your insurability is at its peak and life insurance rates are relatively low and a policy represents excellent value.

    Is life insurance for you and your family one of your New Year’s resolutions? Ask me about plans and rates. Contact Carly Ebenstein, CJB Insurance Services: 510.342.2670, carly@cjbins.com.

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