My last column on why we should buy life insurance on our children created enough conversation with my clients that I thought a follow-up article on why we all should buy life insurance and when we should buy it was appropriate.
I went online and looked up the average funeral cost in Pennsylvania. It is $7,895. That site also provided the average cost of end-of-life expenses as $13,967, making for an average total cost of $21,454. (End-of-life expenses consist of health care, medications, care facilities and legal expenses.)
So unless you plan on having the state take care of you, or some rich relative to pay your bills, you need to plan on having roughly $25,000 set aside for the fateful day.
The ideal situation would be to purchase life insurance the day before you die. Unfortunately, few of us know when that day will be and life insurance companies ask enough questions to not issue many policies the day before you die.
We also know that some of us will die soon and others will die many years from now. So to purchase a policy that will provide a death benefit today or 60 years from today, we need to purchase a policy designed to last until the day of death. I plan on discussing types of policies in future columns.
There are two important factors that determine the cost of any life insurance policy: your age and current health status. These factors are constantly changing and, for most of us, not for the good. Life insurance costs more as we get older, and as we get older, our health status deteriorates.
Paying the end-of-life expenses is one reason for buying life insurance, but there are other reason we may want to provide benefits to those we leave behind. First is replacing the loss of income we provide to our families. If you earn $50,000 per year, to replace just five years of your income, you need $250,000 in life insurance. If you have debt, like a mortgage or car loan, additional life insurance should be considered.
Fulfilling promises like providing for your children’s education and caring for an elderly loved one may be reasons for purchasing life insurance. Is there someone obligated to pay off your student loans other than you?
Purchasing life insurance is a responsibility we face if we love someone and want to provide for that individual. Unfortunately, premature death prevents us from fulfilling our commitments. We purchase life insurance not because of our eventual death, but because the people we love will live. It is an emotional decision that, when made, will provide a sense of security in an ever-changing world.
If you have purchased life insurance, review it. Ask your life insurance agent to provide updated illustrations of the values of your policy. Make sure the benefit originally purchased is adequate for your needs today. Make sure your beneficiaries have been updated. Telling a spouse he or she is not the beneficiary of the spouse’s life insurance is not one of my favorite tasks.
Most of us should purchase needed life insurance now. It will be the lowest cost you will ever pay because today is the youngest you will ever be. Today also may be the healthiest day of your life, so take advantage of it.
And life insurance purchasing is not a one-time event. Your needs will change and additional purchases may be necessary.
Bob Hollick is a State Farm Insurance agent based in Washington. His column appears every other Thursday in the Observer-Reporter.