Are you a young parent? Are you one of the countless that do not have life insurance or adequate life insurance in place? While many of us, parents and non-parents alike, do not want to think about our deaths it is a fact of life. In fact, death and taxes are the only guarantees we have in life. In a recent Bankrate.com survey of 1,000 adults, 37% of those with kids younger than 18 did not have life insurance at all. And those who were insured had a policy with a death benefit less than $100,000.
As a life insurance agent and student of financial planning these figures alarm and frighten me somewhat. The goal of life insurance is to provide your family a source of income to replace the deceased income earning ability. Many people use life insurance proceeds to pay off the mortgage or pay for a child’s college education in addition to supplementing the loss of income. That means a policy’s death benefit needs to on average be between seven and ten times the wage earners income. And as I have written previously the amounts and types of policies can be changed as your family’s needs change. I recommend a combination of term policies and some form of permanent policy to cover your family adequately.
In addition to life insurance many people, not just young parents, have not updated their will if they even have one. I recently read a survey that stated that about 60% of people have not updated their wills in the last five years. This can cause a serious problem in the event someone passes who had a new child, got married or divorced. No matter what the current situation is a will is what tells the probate courts how to distribute your property. This again can cause some serious issues if you have had a significant life event in the last few years. As a young parent or recently married person things can get lost in the life transition.
The first thing a new parent or couple needs to do is get life insurance in place to protect their new family. Again, this should ideally be between seven and ten times the wage earners salary to adequately protect your loved ones. Next on your agenda is to update your wills to reflect the recent changes you have experienced. Be that the addition of a new child or new spouse you have to update your will. If you have children your will tells the courts who you would want to care for your kids in the event both parents pass at once. If this is not done the state courts will make this decision for you, and no parent wants to leave such an important decision up to a state court judge.
In addition to getting life insurance and updating or creating a will, it is imperative to update the beneficiaries on assets that pass directly upon your death. In the event, someone dies no matter what their will states the person who receives the asset will be the individual or individuals named as the beneficiary. In the event, someone has gotten a divorce and named their old spouse as the beneficiary that is who will receive the assets and not the new spouse or someone else. It is always paramount to update IRA’s, 401(k)’s, annuities, life insurance and other assets that have designated beneficiaries.
As you can see, life insurance and similar things are crucial in the scheme of things. If you are a new parent or have just changed your marital status, these things can be vital for the protection of your new family. While it is true that as you get older life insurance may not be as important as it is when you are younger in a family situation it is still something that does need serious consideration.
If you have any questions or need additional information on life insurance feel free to contact me directly.
