Why do you need life insurance? If you're like most, you see it as a way to replace income.
There is no doubt that the need to protect against the loss of a family's main source of income is an integral part of providing surviving family members with a financially secure future. However, for many families, life insurance coverage begins and ends with the primary breadwinner. Less obvious is the financial impact of the death of either parent or a child who doesn’t earn an income.
Life insurance is a sound risk management tool and appropriate for any individual whose death would cause a financial loss to a family. Although a stay-at-home spouse may not earn income, the value provided to the family is, in many ways, immeasurable. Even so, there are real costs a newly widowed parent will likely face if a spouse were suddenly gone.
One of the most important reasons to insure children is to guarantee they will be able to have life insurance as adults, regardless of their future health or genetic blueprint.
The death of a stay-at-home parent will likely trigger an immediate need to find and pay for child care. This can be a sizeable expense if the children are elementary school age or younger.
Funeral and burial expenses can average between $5,000 and $25,000 or more depending on the type of arrangements. And, if the family member who has passed was ill for an extended period of time, there may be significant medical bills, debts or other unexpected expenses to pay.
A surviving spouse or parent may need to take time off from work to get things back on track and, in some cases, allow time for a job search, or training in a new career or field to support the new family dynamics. Insurance proceeds can also help pay for any counseling that may be needed by surviving family members.
One of the most important reasons to insure children is to guarantee they will be able to have life insurance as adults, regardless of their future health or genetic blueprint. This is especially important when there is a family history of disease or illness or, in the case of adoption, where the family history may not be known. Having life insurance in place now on a stay-at-home spouse ensures he or she will have protection down the road when and if it is needed for estate planning, charitable giving, education costs or even income replacement if returning to work is a future possibility.
FUTURE FINANCIAL ASSET
While insurance protection is the primary reason to purchase permanent life insurance on a child, the accumulated cash value in a permanent life insurance policy may grow to be quite significant at adulthood. This cash value can be drawn on to pay for educational or other expenses. Since withdrawing the cash value will reduce the available protection of the life insurance policy, you should discuss any withdrawals with a trusted advisor.
LEAVING A LEGACY
Many bereaved families have found comfort in providing a lasting remembrance of their lost loved one by making a substantial gift to charitable, educational or other organizations. Proceeds from a life insurance policy can even help surviving family members establish an ongoing memorial or scholarship fund in honor of their child or spouse.