At Halcomb Singler, LLP, we meet with a lot of people. Often, when our client’s circumstances include possible bankruptcy or debt consolidation, we discuss our client’s monthly living expenses. As a part of this discussion, we always discuss life insurance. Due to the number of people we talk to about life insurance, in our experience, middle-class and upper middle-class are very, very underinsured when it comes to life insurance.
Again and again we are given one of the following three (3) answers:
1. We don’t have any life insurance. I know we need to get some;
2. We have life insurance through work. It pays out $25,000.00 if either of us dies;
3. We have all the life insurance we need. We each have a $100,000.00 policy.
Halcomb Singler is a law firm that represents individuals and small businesses in Indiana. Halcomb Singler does not sell life insurance. But we feel the need to set straight the fact that it seems many, many people have far too little life insurance and it is a problem.
Most adults completely understand that life insurance is something that they need. They may have been putting it off because they feel that they can’t afford it. The bottom line is that it is a necessity. If you have a family that you care about even a little bit it is a necessity. It is more important than a newer car, than cable, than eating out at a restaurant. GET SOME LIFE INSURANCE.
As far as the amount is concerned, that is where the largest problem lies. Specifically, people seem to think that $100,000.00 in life insurance is a magic number that is always enough life insurance. While certainly, a $100,000.00 death benefit is a lot better than no life insurance, it is by no means enough money for most of the people living in Carmel, Noblesville, Westfield, Fishers and Zionsville, Indiana that we meet with at Halcomb Singler. The amount of life insurance that you need is not a “one size fits all” thing. It depends on your family, the amount of debt you have, the amount of savings that you have and the amount of income that you make.
In the event you are a married couple and both of you are working outside of the home and have two (2) children, just like the average Hamilton County, Indiana family, you are likely underinsured. For example, if you and your spouse both make $60,000.00 per year, for a total of $120,000.00 per year where would you be if your spouse passed and you had $100,000.00 in life insurance? Your household wouldn’t get any less expense to run. Your children would still likely need childcare. You are also going to have to run an entire household on your own. You would probably like to hire a housekeeper because you won’t have time after work and you and your young children might benefit from therapy due to the loss of your spouse, but you won’t be able to afford it.
Instead, you will be meeting with a realtor to discuss selling your house, will be working on selling your spouse’s car and will be trying to grieve the loss of your spouse while also doing your full-time job as well as taking care of your household and your children on your own. Yes, you will have received $100,000.00 when your spouse died. But you likely used about $8,000.00 of that on your spouse’s funeral and burial. So, you are down to near $90,000.00, which is the amount of money your spouse made in a year and a half. You have a year and a half to figure out how to need half the money that you used to need to run your household. Without a major change, you are not able to pay for the college educations of your children. You are going to be living paycheck to paycheck in a year and a half with little to no safety net.
Now, imagine that you and your spouse had purchased one million dollars in life insurance. After your spouse passes you will not be rushed to move, to sell personal belongings or to get a better job. You would have the financial ability to allow yourself and your family the time to grieve. You would be able to take some time off of work, perhaps take a vacation with your children and to get you all the therapy you need.
Money is not going to take away the pain if your spouse should die unexpectedly. And even one million dollars may not be enough depending on your ages, income, number of children and debt. But please, please, don’t think that $100,000.00 is a lot of money to have for life insurance. Please respect yourself, your family and your marriage enough to buy more than $100,000.00 of life insurance if you are middle to middle upper-class. Don’t put yourself in a situation where you felt eating out, cable and travel soccer were more important that your family’s future. Don’t be in the position to beat yourself up about your choices later. Talk to your spouse about life insurance, meet with a life insurance professional and be prepared for the worst. We all hope that you won’t ever need it and that it will be wasted money, but if you do find yourself in this terrible and tragic situation the last thing you are going to want to worry about is money.