11 - 2007

Give yourself credit: Do you have life insurance?

Remember that sentence you read way back when in that one financial planning book about being prepared for contingencies … and how you promised to go buy life insurance that minute?

And how then you went to a movie and — oh, was that eight years ago already?

This past week, the father of an acquaintance of ours passed away. We were told that what the family needs now is money, because he didn’t have life insurance. With burial costs averaging $5,000 in the United States, not having insurance means, at a minimum, you’re going to cost your family if something happens to you. Worst case, if you have dependents, their lives are going to become very difficult without your income.

We have inexpensive life insurance through TIAA-CREF (and no, they’re not paying me to write that). At least when we purchased the policies, they had great rates. How’s the coverage? We haven’t died yet, so I don’t know, but it is a solid company.

TIAA-CREF also offers a calculator where you can try to determine how much insurance you need. A rule of thumb for income replacement is about 60 percent of the insured’s income is needed. For our family, we considered having the ability to pay off the mortgage important, because that would make that much of one salary unnecessary. You also might want a college fund for your kids or to pay off any outstanding debt.

People often debate whether life insurance is needed for a child. One agent suggested to us that if you don’t have the assets to pay for a child’s funeral should the unthinkable happen, you might want to have an insurance policy. Most likely, you’ll never need it. But if you did, the last thing you would want would be to have to write a check to Visa every month for years to pay for your child’s funeral.

The younger and healthier you are, the less expensive insurance costs. Buy a renewable policy that will carry you through your kids’ childhoods, at least, so that you know you are covered for twenty or thirty years. By the time you’re no longer supporting a family, life insurance is less necessary. The process is relatively painless — provide some information and, usually, undergo a short medical exam, often at your home. Go do it now — before you forget about it for another year.

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