Mythbusters: Life Insurance Edition

Written By: Marissa Waldron, CFP®

If you caught Shawn’s article last week, you’ll know that September is Life Insurance Awareness Month. Almost half of Americans are un- or underinsured. People who do own life insurance feel much more financially secure than those who don’t, knowing their loved ones will have some kind of safety net if anything should happen to them. So why don’t more people have an adequate amount of life insurance?

People have many different thoughts or misconceptions about life insurance that may cause them to put off getting it, or to believe they don’t need it at all. While this can certainly be true that some people don’t need life insurance, that’s not the case for the vast majority of families, with and without dependents at home, both in their working years and retirement. Let’s take a look at some common thoughts people have about life insurance.

  1. “It’s too expensive!” Many people tend to overestimate the cost of life insurance, but life insurance can be tailored to fit your needs and your budget. Like other types of insurance, cost will vary from person to person, and it is generally based on your age, gender, and overall health. If you’re relatively young and healthy, you could get a $500,000 term policy for around $25 per month. Most people could get smaller policies for less than that, which will be readily available to beneficiaries to help with immediate costs after death, rather than possibly waiting for the estate to settle. You pick the amount of coverage and corresponding cost that works for you.
  2. “I don’t have an income,” or “I’m not the primary income-earner.”  Even if no one is dependent on your income, they may be dependent on what you provide for the family. A surviving spouse or partner may have to pay for childcare, elder care, or other household tasks if the stay-at-home parent/spouse weren’t around, and these roles can be expensive to fill. Think about daycare, babysitters, meal services (or eating out), cleaning, home maintenance, lawn care, etc. Even if you aren’t bringing in a full-time income (or any income!), your family would likely be financially impacted if you passed away.
  3. “I’ve saved enough to not need life insurance.”  This is certainly an enviable position to be in, but have you had that professionally evaluated? Dying can be very expensive and even cushy savings accounts can be depleted due to accidents, medical expenses, or end-of-life care. If the savings is drained, it may not leave the surviving family members with enough to maintain the lifestyle they’re accustomed to, and a surviving spouse may not be able to go back to work.

Say What?

A 21-year-old intern from Charleston, South Carolina has crunched the numbers and figured out the best way to afford her summer internship in New York City … is by “super commuting” by plane once a week. During her 10-week internship, she’ll spend a total of around $2,250 on flights which will cost about $2,000 less than paying rent in an apartment in NYC.

This week in history

1777 – The American flag was flown in battle for the first time during a Revolutionary War skirmish in Delaware.

1998 – Mark McGwire hit his 62nd home run of the season, beating the most revered record in baseball.

1998 (Sept. 8) – A record one-day gain in the Dow Jones Industrial Average. The average gained 380 points – nearly five percent – to finish at over 8,000 points. The gains were in response to then-Federal Reserve Chairman Alan Greenspan that he was inclined to cut interest rates to prevent an economic slowdown.

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