In our “Money Mic” series, we hand over the podium to someone with an opinion on a financial topic.These are their opinions, not ours, but we welcome a constructive, thoughtful discussion.
According to a nationwide study conducted by LearnVest and Guardian, although 57% of respondents own life insurance, only 28% feel extremely confident in their understanding of life insurance–and 66% don’t have a good understanding of how to collect a life insurance payout.
Today, LearnVest Assistant Editor Alden shares a very personal story from her childhood, which drove home to her just how important it is for parents to have life insurance.
We are grateful that she has shared a story so close to her heart; in your comments, please be respectful.
December 1989. My father gathered up his things in his New Jersey office and headed to the door, eager to get home to celebrate the holidays with our family. A co-worker stopped him to chat. “Walter, what do you want for Christmas?”
“Nothing at all. I have everything I’ve ever wanted. I’ve got my three girls.” In other words, my mother, my 9-year-old sister and 3-year-old me.
Up in the Air
My father got his private pilot’s license in 1970 right after the army. “He absolutely adored flying,” my mom tells me. “He didn’t want to do anything else in his free time, besides hanging out with you guys.” He bought a small, used, two-engine Piper airplane in 1988 for commuting back and forth to his two offices in New Jersey and North Carolina. He was a careful pilot and took attentive–almost obsessive–care of his plane.
But just a few weeks before that Christmas, he had an annual inspection, and the mechanic said he was missing a small part for detecting fire in the engine, but he would probably be fine until that part arrived.
My dad climbed in, taxied out to the runway, pushed the throttle forward and lifted into the sky.
The Life We Had
Life was good for my family in 1989. My father was the well-paid president of a marketing company, and made extra income from his side consulting business. My mother stayed at home raising my sister and me. She hadn’t worked since 1980, when my sister was born.
Mom and Dad had just moved us to a tiny town in North Carolina to be closer to family. They bought some land, started building their dream home and convinced my grandparents to build a little home nearby. After looking at the dismal public schools, my parents enrolled my sister in private school and planned to do the same for me.
In short, they had a lot of financial obligations that depended on my father’s income. But they were solid financially, with an emergency fund of about two year’s take-home pay.
My mother set the budget, handled the mortgage paperwork on our new home and paid the bills. Around the time I was born, she took a look at my dad’s life insurance coverage through his job. Many basic policies from employers will pay only about $30,000–not enough to support a family our size for very long.
So she set about calculating how much we would need if something were to happen, taking into account things like our mortgage and living expenses. She took out an additional term life policy to cover him, and a whole life policy for herself that was also meant to finance my sister’s and my college educations. (Here’s the difference between term life and whole life policies.)
She didn’t know at the time, but it would turn out to be the smartest financial decision she would ever make.