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- One of my best friends from high school died at age 27, six months after giving birth to his third child.
- Fortunately, he had term life insurance, which meant his family could take the time they needed to grieve.
- LIMRA found that 102 million Americans had inadequate or no life insurance in 2021.
We all know that we can die at any time. But as a healthy 20-something, I never thought about leaving my loved ones behind with much more than a casual nod of acknowledgment.
That changed in January 2010 when I got a message on Facebook that Matt, one of my best friends from high school, had died in a car accident. He left behind his wife Trisha (his high school sweetheart and also a good friend of mine) and three children, the youngest of whom was only six months old.
I gathered with my high school friends for his funeral. It hasn’t even been a decade since we helped Matt ask Tricia to the prom, had take-and-bake pizza nights, and performed in school musicals. Suddenly my sense of mortality became very real.
In the months that followed, I talked to Trisha about Matt’s death and what to do when a loved one dies. At 27, I had no idea the logistics involved, but since she and I were both stay-at-home moms at the time, I was now paying full attention.
One big question in my mind was, “How do I prepare for this if it ever happens to me?” Because I suddenly believed it could.
Benefits provided by life insurance
I was relieved to learn that Matt had term life insurance, which allowed Tricia the financial resources to take care of final arrangements and her young children without having to rush from grieving widow to working mother.
Matt and Trisha’s story is exactly the risk that this form of protection seeks to mitigate, and it can happen to anyone. Unlike many other forms of life insurance, term insurance is simple – the policyholder receives a lump sum payment that is generally tax-free if the insured dies. It is not tied to savings or investment funds; it just helps your loved ones take care of your funeral and replaces a portion of your income if you die.
Financial experts highly recommend term life insurance for young families with dependents, especially when one spouse is the primary breadwinner. This helps surviving family members take care of funeral expenses (which average around $7,000 to $9,000) and eases their financial situation.
It’s worth noting that stay-at-home spouses also benefit from life insurance. The unpaid work they do (such as cooking, cleaning, babysitting, making appointments, paying bills, and more) has to be done by someone, and grieving partners may not be able to shoulder the entire burden alone. Having a non-working partner life insurance policy allows the other to outsource some of these household responsibilities.
Too many Americans are underinsured
In a study by the Life Insurance Marketing and Research Association, only 52% of Americans had life insurance in 2021, up from 63% in 2011. LIMRA reported that there are 102 million Americans who need life insurance or more coverage .
Of the respondents to the study, 42% said they would “face financial hardship within six months” if the breadwinner in their household died, so it’s safe to say that a large portion of the population needs the protection provided by life insurance. insurance.
Although most families will benefit from life insurance, it is not necessary in all cases. To determine if term life insurance makes sense for you, ask yourself these two questions:
- Does someone else depend on my income and/or work?
- Would my family face financial hardship if I die?
If the answer to any of these questions is yes, it is worth considering getting a life insurance policy.
Some life insurance is better than none
A common rule of thumb is to start a policy with a payout that is ten times your salary, although this is just mathematical math. You may need a lot more or a lot less, depending on your mortgage payments, savings level, debt balance, whether your family members have special health needs, and many other factors. Tricia later shared with me that while the amount of life insurance she and Matt had chosen was adequate to provide for her family, things would have been easier if they had doubled it.
Regardless of whether the amount of life insurance you choose is exactly the right amount, it’s safe to say that some is much better than none.
Matt’s death forever shaped my view of life insurance. Since then, it has never been a luxury item in my budget, but an absolute necessity. Tricia’s story could easily have been mine.
I’m thankful that my two friends were wiser than I was at 27 and got term life insurance to protect their young family. Without their planning and foresight, one tragedy could easily become two.