Life Insurance 101
There are so many ways to be a good spouse and parent: washing the dishes unasked, supporting your family’s ambitions and dreams, throwing a surprise birthday party complete with red velvet cake (your 11-year-old’s favorite!) … and getting life insurance.
Yup, life insurance is a key aspect of a couple or family’s financial plan. It’s not necessarily something you want to think about, but we think you’ll want to read this guide–it could be one of your biggest regrets if you don’t.
Life Insurance in a Nutshell
Life insurance is like other types of insurance–car, home, health–in that you pay a monthly premium in case something bad or unexpected happens, in this case a death of an income earner and/or spouse.
In short, it means that if you or your spouse dies, you or your children won’t have to deal with financial uncertainty and drastic changes while also dealing with the emotional loss. Your life insurance policy isn’t for you; it’s for other people in your life who depend on you.
Clearly, life insurance can’t “replace” a deceased loved one, like car insurance can replace a car. But it can replace—at least partially—the income he or she was contributing to the household, the income you or your children depend on to stay financially secure and enable your family to continue to live a lifestyle close to what you have now.
Why Life Insurance Matters
Compared to health insurance, which you use every time you pick up a prescription, you rarely have a reason to think about life insurance. But it’s arguably the most important kind.
Life insurance is especially important right now, as more families have been forced into living on a single income due to the recession. In a 2010 survey by insurance research firm LIMRA, 40% of households with children under 18 said they would have trouble meeting financial obligations if a primary breadwinner passed away. But unfortunately, LIMRA’s research shows that individual life insurance ownership is at a 50-year low.