Nearly everyone has a general idea of what the Harry Potter books are about: as a baby, Harry Potter’s parents are killed by a dark wizard and he grows up facing many obstacles and *spoiler alert* eventually defeats said dark wizard.  Although the story would not be as interesting, imagine if Harry Potter’s parents had planned ahead and drafted a will and bought life insurance.

Have Kids? Create a Will

Arguably, the most important aspect of a will is the part where it says what happens to your minor children when you die.  Planning who gets your heirloom jewelry is important too, but nothing compares to how essential it is to make a plan for your children.  You don’t want strangers deciding who is responsible for caring for them.

James and Lily Potter did not have a will.  When they died, no one was sure what to do with little baby Harry.  He ended up going to his closest living relatives – the Dursleys.  The Dursleys had no say in the matter.  They were Harry’s next living kin, so they became responsible.  They were given a letter of instruction on how to care for Harry, but they promptly ignored it.

Creating a will isn’t too difficult.  Generally, a will includes:

  • Your name and place of residence;
  • A description of any assets you wish to give to a specific person;
  • Names of spouse, children, and other beneficiaries, such as charities or friends;
  • Alternative beneficiaries, in the event a beneficiary predeceases you;
  • Establishment of trusts, if desired;
  • Name of a trustee of any trusts created;
  • Name of a personal representative to manage the estate;
  • Cancellation of debts owed to you, if desired;
  • Name of a guardian for minor children;
  • Name of an alternative guardian, in the event your first choice is unable or unwilling;
  • Your signature;
  • Witnesses’ signatures.

With a will, James and Lily would have likely stated that Harry was to live with his godfather Sirius Black.  For you fans of the series, you know how life-changing this could have been not only for Harry, but for Sirius as well.

Have Kids? Get Life Insurance

James and Lily Potter were very nice people, but they obviously weren’t great financial planners.  They did leave a lot of money for Harry, but failed to leave any sort of documentation for it.  Harry had no idea his parents left him a small fortune until he turned eleven.

What the Potters should have done was buy life insurance.  Because Harry was a minor, they could not have named him beneficiary, but they could have either named Sirius Black beneficiary, since he would have been in charge of Harry according to their will, or created a trust and state that as the beneficiary.

The life insurance death benefit would have been able to provide a happy and healthy lifestyle for Harry.  He likely would not have had to live in a cupboard under the stairs all those years, becoming skinny and pale from lack of proper nutrition and living arrangements.

Term life insurance is very customizable and affordable.  Let’s say James and Lily planned ahead and purchased life insurance.  What would they have had to pay?  First of all, we need to determine how much coverage they would have needed.

How much debt do they want to pay off?

(When calculating this, you want to keep in mind any money you owe such as a mortgage, student loans, car loans, or credit card balances.)

James Potter Lily Potter
Student loans: $43,000 (Hogwarts isn’t cheap, you know!) Student loans: $43,000
Mortgage: $250,000 Mortgage: $250,000

How much monthly income do they want to provide?

(When calculating this, you want to include any income you provide on a monthly basis; your paycheck is a good starting place.)

James Potter Lily Potter
$2000 $2000

How many years do their loved ones need income?

(When calculating this, you need to decide how many years you think it will take for your loved ones, spouse and children, to become financially stable without your income.)

James Potter Lily Potter
5 years 5 years

After running these numbers through the Quotacy needs analysis tool, it’s determined that both James and Lily should have $420,000 in life insurance coverage each.  As for how long they need coverage for, I would recommend a 20-year term to ensure Harry gets through school and becomes an independent adult.

When Harry was born, James and Lily were both 20 years old.  How much do you think it would have cost them to buy these life insurance policies?  I’ll run the numbers through Quotacy’s term quote engine.

James Potter Lily Potter
Coverage: $420,000 Coverage: $420,000
Term Length: 20 years Term Length: 20 years
Estimated Monthly Premium: $19 Estimated Monthly Premium: $17

As you can see, it would have cost them very little to provide Harry with a significant death benefit amount.  I want to note that Lily is slightly cheaper because women statistically live longer than men, so life insurance companies require less payment.

When purchasing these policies, James and Lily would have likely named each other primary beneficiaries, followed up by naming Sirius Black their contingent beneficiary as custodian of their minor son.  If they had decided to create a trust, they could have chosen to name the trust the primary beneficiary and named each other co- trustees with Sirius being successor trustee.

How Much Will Term Life Insurance Cost Me?

Now, if you’re reading this and thinking “I have children and I really should get life insurance, but I’m not as young as these fictional characters.  It’s going to be expensive for me.”  I’m here to reassure you that even if you’re not 20 years old, life insurance can still be quite affordable.

The cost of James Potter’s same exact life insurance policy for a healthy 35-year-old male is an estimated $20 per month and the cost of Lily’s exact policy for a healthy 35-year-old female is $19 per month.  The policies only increased one dollar for this 15-year age difference.  For 40-year-olds?  The estimated monthly costs go up to $28 and $25, respectively.  My point is that it is within the budget to get thousands of dollars of life insurance coverage to protect the welfare of your loved ones.

Relating the importance of life insurance to the make-believe story of Harry Potter may seem silly, but, really, it isn’t.  Harry’s situation (without the magic) happens in real-life to good families every day unfortunately.  You never know what life may bring.  You hope to live a long and healthy life surrounded by your loved ones, but this isn’t always the case.

Parents, what happens if you die unexpectedly leaving your children behind?  Have you prepared for this scenario?  Of course it’s not something you wish for and you’re likely thinking “It won’t happen to me.”  But what if it does?


Photo credit to: Nathan Hadley


Related Posts:

The Importance of Writing a Will

How Much Life Insurance Coverage Do You Need?

What is a Trust?

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