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Who in your life currently benefits from your income? Other than yourself, it could be a spouse or partner, children—whether minor or adults, or even aging family members. Let’s discuss life insurance and family. 

When there is an unexpected death in the family, ideally, money is the last thing loved ones should need to worry about. But when a provider dies, bills don’t stop even if the paychecks do. In addition, the death creates an immediate need for cash to pay end-of-life medical expenses, funeral costs, and any estate administrative fees, debts, and taxes.

An unexpected death of a provider also triggers a long-term need for cash to make up for the future earnings that are no longer there to depend on. In dual-income households, most don’t have the financial resources to maintain their standard of living if one income is suddenly lost. For single-income families, the death of the breadwinner would have even harsher financial consequences.

Life insurance can provide the necessary protection for both immediate and long-term cash needs.

Life Insurance as Family Income

A family will need an immediate income to meet everyday expenses such as food, clothing, utilities, home and car maintenance, insurance, medical care, and property taxes. Cash to meet these needs is important as a family grieves the loss of their loved one.

A surviving parent will also need on-going financial support while children are dependent. Not just for living expenses, but for the extras that make life special: vacations, music lessons, sporting activities, etc.

After children are grown and financially independent, a surviving spouse may still need income to ensure a comfortable lifestyle and maintain the same standard of living, without being forced to dip into retirement accounts early. This is even truer if you currently are, or likely will be, caring for aging relatives.

Life insurance removes the financial burden survivors face by providing an infusion of cash right when it’s needed most. It provides a welcome cushion that allows them to grieve without financial worry. It gives them time to adjust to a new, uncertain life.

Term life insurance is easily customizable and affordable. The death benefit is also tax-free for your beneficiaries.

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Buying Life Insurance for Your Family

You may not be able to save your spouse and children from emotional pain, but you can help them avoid unnecessary financial struggle.

When thinking about buying life insurance, you may consider replacing your annual salary, but don’t stop there. For example, your employer may currently cover the majority of your health insurance premiums. If you die, your family would lose these benefits in addition to your salary.

Also consider the fact that dying unexpectedly often means there’s medical bills associated with it. And funeral and burial expenses alone can cost more than $10,000.

Thankfully, term life insurance is easily customizable and affordable. The death benefit is also tax-free for your beneficiaries.

Term life insurance is temporary and only lasts a set amount of years that you choose. Depending on your age and health, term length options are 10, 15, 20, 25, 30, 35 and 40 years.

Coverage amounts range from $50,000 to millions of dollars. The amount you need depends on your finances, financial goals, and family situation. Your focus should be to pay off sizeable financial obligations, like a mortgage, and cover living expenses like food and clothing.

» Calculate: Life insurance needs calculator

Once you buy your term policy, your premium amount is locked in and doesn’t increase. This is why it’s important to buy a policy as soon you as you have a need. If you wait, you’ll likely pay more. The cost of life insurance increases as your age increases.

20-Year Term Life Insurance Monthly Quotes for Healthy Non-Smokers
Age$250,000$500,000$750,000$1,000,000
MaleFemaleMaleFemaleMaleFemaleMaleFemale
25$12.35$10.89$19.11$15.72$26.11$21.04$31.16$23.47
30$12.62$11.10$19.43$16.32$26.60$21.94$34.12$25.06
35$13.38$12.12$21.67$17.87$29.95$24.25$39.77$31.45
40$18.91$15.30$31.53$24.60$44.75$34.36$54.10$46.22
45$26.31$21.22$46.27$37.20$66.86$53.24$90.52$69.10
50$40.57$31.66$72.67$56.83$106.46$82.69$144.86$113.05
55$64.81$48.87$119.13$89.24$176.14$131.32$236.12$166.17

Referring to the table above as an example, a 35-year-old healthy man can purchase $500,000 in term life insurance coverage for $21.67 per month. This coverage would last 20 years.

Both parents need life insurance, even if one is a stay-at-home parent. Stay-at-home parents handle many tasks that a surviving spouse would have to pay someone else to do. Caring for children or elderly parents, keeping up with cooking, housecleaning, and yard work—these things add up.

Typically, a stay-at-home parent can purchase the same amount of coverage as the working parent. If the working parent has large amounts of coverage, some carriers will set a maximum limit on the stay-at-home parent.

Beneficiaries of Your Life Insurance Policy

The main goal of life insurance is providing financial protection to your family. But if the proceeds aren’t set up to go to the right person, then you can’t accomplish your goal.

First thing to note is that if you are buying life insurance to leave money to your children, don’t list them as the policy beneficiaries if they are minors.

In most states, to protect the assets of a minor, law requires a guardian be appointed to administer funds if a sum is left to a child. If you don’t set up the policy properly, the court system will appoint a guardian they deem fit.

Create a trust and designate it the beneficiary of the life insurance policy. Or name a custodian as the beneficiary to manage the money on behalf of your children.

Also, don’t forget to review your policy every few years and after important life events. You want to make sure your life insurance policy is still in line with your goals and wishes. Beneficiary changes are not uncommon.

The purpose of life insurance is financial protection from the loss of your income and protection from the emotional stress of struggling to meet obligations during times of grief. As difficult as it is to think about and discuss with your loved ones, the thought and planning you put in now can provide enormous relief to your family if the worst should happen.

Quotacy can help you put life insurance protection in place. We’ll help you find an affordable policy that fits your needs.

Start the process today by getting free term life insurance quotes. You can view life insurance rates instantly without even providing any contact information.

The online application process is easy and simple. After applying, your Quotacy agent will keep you posted from start to finish and happily answer any questions along the way.

Note: Life insurance quotes used in this article accurate as of June 1, 2021. These are only estimates and your life insurance costs may be higher or lower.

 

About the writer

Headshot of Natasha Cornelius, a life insurance writer, for Quotacy, Inc.

Natasha Cornelius

Marketing Content Manager

Natasha is a writer and content editor at Quotacy. She is also co-host of Quotacy’s YouTube series. She can't get enough of life insurance and outside of work is also working toward her Chartered Life Underwriter designation. Connect with her on LinkedIn.