Having life insurance for your family is necessary to help avoid financial devastation. Most families rely solely on the group insurance that is provided by their employer. Have you taken the time to evaluate if that coverage is adequate for your family? Look at the following scenarios to help you think about why having adequate insurance is important for your family.
Daniel and Maria Thomas have been married for 6 years. They have two children, Skyler, age 4, and Seth, age 1. Daniel works outside of the home for a company that provides benefits and Maria stays home to care for the children. With Daniel providing for the family, his income covers the financial responsibilities for the home. The responsibilities include the mortgage on their home, utilities for the home, two vehicles, three credit cards and the expense of normal day-to-day necessities.
If the unexpected should happen to Daniel, what could happen to Maria and the children? With Daniel working for an employer with benefits, we can assume that he has group life insurance. The amount of the death benefit on the life insurance varies based on the benefit package that is specified by the employer. There may be a base amount that Daniel’s family is awarded upon his death. This amount may be up to $10,000. If Daniel elected additional coverage during benefit enrollment time, his family may be awarded a death benefit of one or two times his annual salary.
Depending on the amount of group life insurance, Maria can be faced with unsettling financial decisions. If the amount is $10,000, Maria may have just enough to cover the cost of the funeral/burial expense. If the amount is one or two times Daniel’s annual salary, Maria will have to proportion the amount so that she can live on the income for the next one or two years. In the meantime, Maria will have to prepare to enter the workforce to replace the salary that was covering the expenses for the household. If the salary is not replaced, Maria may face financial devastation. This can include losing one or both vehicles as well as the home that keeps her and the children safe at night.
In this scenario, instead of something happening to Daniel, the unexpected happens to Maria. The group life insurance that Daniel has does not work the same for the spouse of an employee. During benefit enrollment, Daniel will need to elect to purchase coverage for his spouse and children. For most employers, the benefit package may specify an amount of up to $20,000 per family member. With the unexpected happening to Maria, Daniel will have $20,000 to cover the funeral/burial expenses with not much left over. Because he was the breadwinner of the family and all household expenses relied solely on his income, Daniel and the children may not be faced with financial devastation such as losing one or both vehicles and the home. However, there will be another expense added to the household that Daniel was not expecting.
With the age of the children, Daniel will have to consider the cost of in-home childcare or out-of-home daycare for the daily care of the children while he continues to work outside of the home. This expense could last at the minimum of four years as the youngest child is only one years old. Even when the children start school, after school care may be needed as Daniel’s work hours may conflict with school hours.
In this scenario, the unexpected happens to one of the children. Just because the children are at such a young age does not mean the grieving process will be any less. Also, just because the children do not contribute to the household income does not mean this cannot cause financial disruption to the family.
If Daniel elected to purchase coverage for his children through his benefit package, he will have $20,000 for the cost of funeral/burial expenses with not much left over. Most employers give the employee a three-day bereavement period. Is this really enough time for bereavement? If Daniel requested a leave of absence from his employment, would he have sufficient funds to manage his household expenses during his leave?
Each scenario demonstrates how important life insurance is for the family. Also, each demonstrates the importance of having the proper type of coverage as well as having an adequate amount of coverage for the family. Although you may have group life insurance coverage, take the time to evaluate and determine if additional coverage outside of group insurance is necessary to help prevent financial devastation for your family.
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