Life Insurance & Will

I've been having this feeling that I need to post about the importance of life insurance & having a will.  I don't know why I've been having this feeling but hopefully giving you actual numbers will help you really understand the importance.  Maybe even mentally run through your numbers to see if you have enough life insurance.

Life Insurance

The words themselves sound like something you have to deal with when you're an adult.  I don't know about you but at 36 years old I am classified as an "Adult", however I sure as hell don't FEEL like an adult.  Life Insurance is one of those adult things that I hope you are at least aware of, if not already having some inforce.  This is something that I learned about at a young age from my dad.  He had taken an individual policy out on me when I was a baby and every year at renewal we would go over it.  At this young of age, I knew it was good to have, but in my mind I wasn't going to die for a long, long time.  It could be possible that this in some way, lead me to my current profession of working in the insurance industry.  I work for a company that sells life, short-term disability, long-term disability, dental and vision insurance to other companies for their employees.  If you have any of these benefits through your employer, I work for a company that handles them.  (Easiest way for me to describe it).   

Through my employer, I have a life policy and also elected a voluntary life policy for myself, Wylie and both boys.  Wylie also had a small policy through his employer, but not enough to cover all our expenses.  Wylie built scaffolding for a living, so the chance of him falling or having an accident was pretty high.  In fact, I had figured that he would die from a work accident or car accident, in which case the policies would pay double due to it being an accident.  Never once did it cross my mind he would die of natural casues at age 33.  With that being said, the life insurance that was paid out was not as big as my little scenario was figuring, although it was enough for me to not have to worry about finances for the time being.  I can't tell you how huge of a relief that was to not have that issue to worry about.  So much so, that I want everyone else who reads this to have the same assurance knowing money won't be an issue they will have to deal with after loosing their spouse or loved one.

Let's cut to the chase.....Everyone NEEDS Life Insurance because you will die at some point.  Harsh I know, but it's a fact of life.  No one gets out alive.  Give yourself the piece of mind knowing that your loved ones will be able to cover your expenses and continue to live without having to worry about money.  Wylie's salary was more than mine and we depended on both of our salaries to get by on.  Not having his income (and obviously not having him) was a pretty big hit to us.  Notice I said US there.  The boys were very aware at 8 & 4 yrs old that daddy wasn't there to work and support us anymore.  They were extremely worried about how we were going to survive and if we were going to have to move because I wouldn't be able to afford our house.  Being able to keep our house provided them with something stable that they could see and touch.  They needed that physical stability to help them cope as their world had just been shattered forever.  

Now let's put some numbers on things to put all of this in real perspective for you.  I'm going to base this example on traditional expenses that most families have.  You obviously may have more or less and can adjust accordingly to your situation.

Common Expenses                                                                                    Amount Owed listed below

Mortgage on House    ....................................................................................          $ 100,000

Auto Loans     ................................................................................................           $   18,000

Credit Card Debt  ...........................................................................................          $   10,000

Student Loans    ..............................................................................................         $     5,000

Misc Loans & Debt  .......................................................................................           $     7,000

                                                                                                                        TOTAL       $  140,000

Medical Expenses from Death  .......................................................................         $  40,000 

Funeral Expense    ...........................................................................................         $    9,000

Headstone & Burial Plot   ................................................................................        $     3,000+

                                                                                                                        TOTAL       $   52,000

To cover your debt, medical & funeral expenses you would need....................       $  192,000



Now the $192,000 only covers your debt and final expenses.  Keep in mind that you still have your daily and monthly living expenses that your surviving spouse will have to now pay with only their income, assuming they are working.  If your spouse does not work, you should definitely consider increasing your insurance amount.  Let's assume the basic monthly expenses below:

Common Monthly Expenses                                                                                    Monthly Amount
Electricity & Gas  .........................................................................................................  $150
Sewer & Trash ..............................................................................................................  $ 40
Water ............................................................................................................................  $ 35
Cable/Internet/Etc .......................................................................................................  $200
Cell Phone ....................................................................................................................  $125
Groceries ......................................................................................................................  $500
Gas  ...............................................................................................................................  $160
Kids Expense (Clearly this number has a huge variance per month) .......................  $500

                                                                                           Total Monthly Expenses:     $1,710  

     

                                                                                            Per below rounded up to     $2,000

       

Monthly Living Expenses are $1,710.  Let's just round that up to $2,000 to cover any unexpected expenses and money put into savings.  

With all the expenses outlined, you can now determine how much life insurance you need.  

$192,000 will cover all of your debt and final expenses.

$2,000 are your monthly living expenses.  

Now the last questions are:

How long do you want to cover your monthly expenses for?  Let's say 2 years

Do you want there to be an extra lump sum of money?  Let's go with $100,000

For all of this you would need a $350,000 life insurance policy.  That would cover all of your current debt, final expenses, allow your spouse to pay monthly living expenses for 2 years and leave an extra lump sum of $100,000.   Yes, that is alot of money, but you and your family will have the peace of mind knowing they will not have to worry financially, while trying to grieve your passing.

FINAL QUESTION FOR YOU:   How much do you need to cover yourself and your family?  Don't forget that your spouse would need at least the same out of life insurance on themselves as well.

WILL

Wylie and I did not officially have one, but we had discussed certain topics at length: mainly who we would want to take care of the boys if we both passed, how the insurance money was to be split up and when the boys could have the life insurance, along with our possessions.  After his passing, I did promptly have a will made out of fear that something should happen to me in the near future.  I wanted all of our wishes legally outlined, so there would be no confusion as to what I wanted to have happen.  

I outlined the 3 people I want to have guardianship of the boys with certain circumstances that must be followed.  For example, Person #1 has certain criteria I want met.  If they are unable to meet that criteria, then Person #2 would take guardianship and so on.  

I have set the age limits which the boys can have their share of the life insurance money and certain family possessions, since I feel they need to have reached a certain level of maturity to handle these.  I have detailed which possessions are family heirlooms that the boys are to have, others that I want certain family members to have and which can be disposed of.   I also detailed my finial wishes which are to be cremated and laid to rest in the plot next to Wylie with our joint headstone.  

In addition to outlining all these things in my will, I also had official copies made for everyone mentioned in it and WENT OVER IT with each of them.  This is was to make sure there is no confusion, everyone understands what is to happen and they each have an official copy to show what I want.   This is one of key parts of having a will:  Discussing with your family and giving/letting them know where your will is.  By doing this, any family members who may not get along, will not have a legal reason to dispute any of your wishes and have already been told by you what you want.

Having a will is just as important as having life insurance, because it specifically outlines what your wishes are in the event of your death.  This way there is no confusion for the surviving family members and will help to eliminate any arguments that could ensue if you don't have one.  Allow me to give you a real life example that I have experienced.

Wylie was the beneficiary on all of his dad's financial matters and all of his possessions.  After Wylie passed, I had talked to his dad several times about who he wanted his new beneficiary(s) to be and what his final wishes were.  Throughout the months, I had asked him repeatedly if he had gotten his will made, but the answer was always "No, I need to get to it."  I even had called him on President's Day (as I had that day off) to tell him that I would take to him to have his will made and pay for everything.  I said would sit in the waiting room, as I had no personal motivational gain in what his finial wishes were.  I simply wanted him to make them legal so I could make sure they were followed, as Wylie would have done.  He told me that morning, he just wasn't ready to make a will yet.

2 months later he passed away and the chaos that I feared would happen, did happen.  Now I'm not going to air out our dirty family laundry on here or go into specifics.  What I will say is that most of his wishes that he and I had discussed were not followed.  I legally had no say in any of his matters, nor did I feel comfortable expressing any of it or getting too involved.  He had several other children in addition to Wylie (he was the youngest), as well as brothers/sisters who would fall in line as next of kin way before his widowed daughter-in-law. There were family arguments, drama and other things that went on, things that could have been avoided if there was a will. 

Please understand that I AM NOT placing any kind of blame on my father-in-law or any other parties involved!!   This is simply a personal experience that I went through that I felt could have gone differently and would like others to learn from.   I hate seeing families disagree or argue after the death of a loved one, because it's a time when they need each other the most.  The simple act of having a will could help eliminate any family drama there may be.

ONE FINAL FINANCIAL TOPIC

In keeping with my being honest and uncensored, I will touch on one more financial topic: Social Security Benefits.   I'm sure many are curious how I am doing financially as I had mentioned above the life insurance did not cover everything.  The answer would be Social Security.  I wasn't even aware of this until it was mentioned to me by another widower.  Our boys receive a monthly benefit from the Social Security that Wylie had paid throughout his life.   I am the executor of these benefits and can use them to support the boys living expenses within certain limits.  There are federal rules that I have to follow, along with saving receipts/statements to show proof of the living expense.  The government sends out a form every year asking how much I've spent on their living expenses and what I have saved for them.  It is not just free money from the government that I can spend all willy nilly.  Now I only know about my family's situation for Social Security, it's clearly different for everyone based on their situation, family and what the government regulations are to receive these benefits.  This is not a benefit that you should expect to receive to get by financially, as you should still plan to have more than enough life insurance.  Though in the event of the passing of a loved one, the call to Social Security was not one that I was aware of to make, that should be made in all cases.

MY GOAL

My goals from this post are pretty simple:

1) That you go & get life insurance ASAP, if you don't already have it!

2) Increase your life benefit, if you realize you do not have enough!

3) Make an appointment to get a will made ASAP!

4) Discuss your will with your family and make legal copies, if you have not already done so!

5) At the bare minimum, realize these are things you need to do & discuss them with your spouse!

NOTE:  I would like to make mention that if I sounded official or heartless in any of this, it is mainly because of my job.  I do have to remove myself emotionally from it, otherwise there would be no surviving it.