At some point in the average person's
life, they step to the plate of
contemplating term life insurance.
There's usually some trigger for this
forced at-bat (to continue the baseball
analogy) such as a new baby or first
purchase of a house. A small
percentage actually understand the risk
involved in not having life insurance
and move forward. Most will look
the other way and assume "it won't
happen to me". Let's look at what
happens when people do not
purchase term life
insurance and the unforeseen
There's such a powerful mental impetus
to bury the risk of passing away against
the immediate dollars saved by not
paying the life premium (even though
those have come down significantly in
of term life). "I will
be fine" is just a bit of mental
acrobatics to avoid the difficult idea
that one may pass away early.
After all, it's a horrific thought so
it's easy to understand why people do
it. Who wants to plan for the
worst case. American are
especially prone to this "take immediate
benefits" over "long term benefits".
Take a look at our savings rate versus
other countries. We love the "now"
and life insurance is mainly concerned
with the "later". The problem is
that you are not just making this
decision for yourself. In fact, if
you're in the market for a
term life policy,
there are loved ones that are
financially dependent on you.
Let's look at what financially
dependents really means when the worst
case occurs (which happens every day).
are the primary or equal bread winner in
a family. You have a 3 year old
girl and a 5 year boy. You earn
$50K annually and your spouse is able to
bring in another $25K part-time so that
he/she can be involved with the kid's
after-school events (which are many!!).
Soccer, guitar lessons, PTO, or just
trying to keep the various meetings,
bills, appointments under some semblance
of organization. The call comes in
and a family's world shatters.
It's the very reason we procrastinate
about purchasing term life...we don't
even want to think about it...let the
possibility enter our brains.
We're protected from it that way.
But we're not.
Everything quickly spins out of control
and the initial wave is emotional and
hits like a wall. We haven't even
dealt with the long term financial
strains...we're just talking about the
whirlwind of activity that occurs right
away. The lone parent must some
how keep the children on some kind of
path of normalcy while juggling the
calls, arrangements, and unanticipated
needs that a funeral brings.
People coming and going. Hard
questions from the kids. The
surviving spouse needs to handle all of
this without giving under the pressure
and his/her own feelings of being
distraught. The funeral and
immediate weeks before and after have
immediate costs which quickly run 10's
of thousands. There's 20K of
savings but the thought of using all of
that hard-earned and even harder to save
money is depressing. It is what it
is and there are no other options.
You and spouse had $37K in retirement
accounts. They may or may not have
provisions for drawing from without
penalty to your passing but that's not
really part of the calculations. A
bi-weekly check for $2000 just
disappeared. In one month,
that's $4K and it takes about a month
just to find firm ground to actually
look at the credit card bills, mortgage,
and just the shear cost of living.
With $25K on one credit card and another
$5K on another to help pay for food,
lodging, and travel during the funeral,
creditors are starting to call about the
two and the chaos has subsided slowly
although there are still really hard
days. Now, how does the family go
from $6K monthly income to $2500?
There's no way to bridge that gap.
The remaining spouse will have to work
full-time and find after-school help for
the children, the cost of which quickly
offsets $300 weekly against the new
full-time income. It still doesn't
cover the $2000 mortgage so the house
will have to be sold. It's not a
good market to sell in but the monthly
mortgage simply can't be maintained.
It's either sell or lose it altogether.
Sold at a discount to the market, the
family finds an apartment at $800.
The price is better but the schools are
worse. It's not a good place to be
when deciding between your children's
academic experience and a monthly
mortgage but it's no longer an option.
It's a hard decision...one of many that
will be coming over the next few months
only reason to really flesh out this
scenario is ot put in perspective the
$30-70 monthly you will pay to avoid
this situation. I guarantee,
based on our past experience as
term life agents,
we will receive calls or letters that
say "Thank you" for writing this
article. If we help only one
family avoid these hard
decisions...we've done our job.