If you've been reading this site for any period of time, you know that I believe life insurance is an integral part of any family's financial plan.
Insurance is there as a way to hedge risk against the unlikely event that the worst case scenario might happen. You carry different types of insurance to insure against different types of risk. Health insurance hedges against the risk of large medical bills that might come along with a catastrophic medical event. Long term disability insurance hedges against the risk of losing an income due to a disabling event. Life insurance hedges against the risk that you may pass away unexpectedly, leaving your family without a way to pay the bills.
While I think all of the types of insurance are important to have, definitely one of the more important types is life insurance.
The Importance Of Getting Life Insurance
A recent Harris Poll conducted on behalf of State Farm found that “84 percent of Americans believe life insurance is a smart way to care for their family’s future and 48 percent say it has been an important part of their family’s plan for generations.”
It's never fun to think about life insurance because it often involves thinking about someone passing away. Who wants to think about that? The truth is, far too many people die before their time, and without life insurance their families can be left in an untenable situation.
A friend of the family passed away recently, somewhat unexpectedly. He was vibrant person, a father and husband in his mid 30s, and out of the blue he was diagnosed with a rare form of cancer. Within a short time after being diagnosed, he had passed away from cancer leaving a wife and 3 sons behind. I don't know if the family had insurance or not, but my impression was that they did not. I can't even imagine the hardship it must have been for that family having to deal with the death of their father and husband, while still having to worry about how they were going to pay the bills. If it wasn't for the help of family and friends I'm not sure how they would have gotten through.
What Events Cause People To Think About Insurance?
State Farm found that 42 percent of Americans have talked with their parents about life insurance and estate planning and 14 percent are planning to initiate a conversation. That's good, but it's far too few.
Life insurance, while not a fun topic, is an important one to put on the agenda for your next family budget meeting.
What types of things typically bring the life insurance topic to the forefront of people's minds? Mark Morris, a public relations consultant with life insurance industry group LIMRA explained that big life events seem to get people thinking about buying life insurance.
“Our research has shown that four in ten people buy life insurance because of a life event – getting married, buying a house or having children,” he said. “Ownership is pretty consistent [across generations] once they have that life event.”
So what are the main life events most often cause people to think about getting life insurance? State Farm released what they found to be the most common:
- 37% becoming a parent
- 30% getting married
- 20% suggestion by insurance agent or financial planner
- 13% buying a home
If you've had a big life event recently, and have started thinking about it – just do it! Your family will thank you through the increased peace of mind. Even if you haven't had one of those big life events – take the steps now and get coverage BEFORE you need it.
Modify Your Budget To Accommodate Insurance
Life insurance should be an important part of your family's financial plan. It needs to take priority in your budget, right up near the top next to what Dave Ramsey likes to call your “4 walls” of food, shelter, clothing, and transportation.
Unfortunately, according to State Farm, despite the fact that 78 percent of parents talk about how important life insurance is for their family, not many of them are actually willing to make it a priority in their budget.
What will they adjust their budgets for? 76% said they would adjust their budgets for cable TV, 69% for family vacations and 62% to pay for their cell phone bill.
Parents understand that having life insurance is important to protecting their family's future, not many of them are willing to make it a priority in the budget when the rubber meets the road. But isn't it much more important to your family's long term financial health?
Talk To Your Family About Health Insurance, Before It's Too Late
Buying life insurance doesn't have to be an expensive proposition, and the protection it will buy your family will give you great peace of mind. When I bought life insurance for my family a couple of years ago, I got over $500,000 in term life insurance coverage for only about $30/month. A small price to pay to give my wife and son a future.
Have you talked with your family about buying life insurance, and have you made it a priority in your budget?
Figure out how much insurance you might need by checking out this life insurance calculator from the folks at State Farm.
Disclosure: This blog post was written as part of a sponsored program for State Farm to raise awareness about the importance of life insurance. All views expressed are entirely my own, and were not influenced or directed by State Farm. You can learn more about this blogger program and life insurance at GoodNeighbors.com, PlantingMoneySeeds.com, and by following #StartLiving on Twitter.