Who needs life insurance?
This article was featured in the Personal Finance section of El Nuevo Herald on Sunday, April 24, 2016. Please find the link to the published article at the bottom of this post.
By: Marianela Collado, Senior Financial Advisor at Tobias Financial Advisors
If your house is anything like my house, you know that death and money is something that is rarely discussed, especially the whole idea of a life insurance. The truth is that the only certain thing in life is death so the responsible thing to do is to make sure that our loved ones are not burdened by our untimely death and that is exactly what life insurance is designed to do.
A question that frequently comes up is who really needs life insurance. In this article, we provide a general overview of insurance needs for different stages in life.
Single: The truth is that most single people don’t need life insurance since there usually isn’t anyone depending on them financially. However, there might be cases where life insurance would be appropriate: If you are taking care of aging parents or disabled siblings or other family members. They would require the same support even after you pass, therefore, providing funds to help cover of the cost of somebody else to take care of them. Lastly, if you have significant debts you don’t want your loved ones to be responsible for. This can also apply to funeral costs, which could be very expensive and can cause hardship to your survivors.
Single with kids: This one might be the most critical case. As a single parent you have all the responsibility in the household. In this case, you should absolutely make sure that there will be something to help protect your children’s future.
Married without kids: A common misconception is that people should just think of life insurance after they have kids. Thought should be given to the fact that the surviving spouse might still need to pay off debts, mortgages, car loans and monthly living expense.
Married with kids: Most families these days depend on the income of both parents to cover their living expenses. Will the surviving spouse be able to make ends meet in the event of the other one’s untimely death? The surviving parent will need to carry the burden on their own. Accordingly, you should consider the benefits of the surviving spouse being able to pay off the mortgage and establish a college plan for the children.
Stay at home moms: One of the hardest (unpaid) jobs in the world. In many cases stay at home moms are not viewed as making a “financial” contribution to the home. Stay at home moms are the caregivers, housekeepers, chauffeurs, financial manager, etc. Think of the cost to replace all these jobs for the surviving spouse.
Retired: At this point, you would think you are home free. However, the decision to obtain life insurance would depend on the overall value of all your assets. If you expect to have total assets in excess of the estate tax exemption, you may want to obtain life insurance to help your heirs pay the estate tax and preserve the value of the estate as their inheritance.
The amount of life insurance will, of course, depend on your specific situation. As with any financial planning strategy, we recommend you speak with your financial advisor.
Link to article on El Nuevo Herald: