I talk to people every day about their finances. As you might imagine, I see a lot of different situations. One thing that I see too often is families that do not have enough life insurance. Too many times people take whatever life insurance their employer happens to provide and maybe they buy a little bit more through work and they leave it at that. They never really thought through the decision and what their family needs, they just signed up during benefits open enrollment at work.
Here's why it drives me nuts. Who do you know who does not have a cell phone? Almost no one, right? High schoolers and senior citizens have them. My 71 year old dad is even texting me now! And phones aren't just phones – we email on them, we text, we look at Facebook, we shop online, we use them as GPS to find our way to wherever we're going in our car. So we have data plans and texting plans. According to a study by Cowen and Company the average cell phone bill is $120 - $148 per month. Now that's an average of the people they surveyed and every family is different. If mom and dad have a phone that's less than if they also have two kids with phones. The point is that we are all paying for cell phones that we cannot live without.
What do cell phones have to do with life insurance you ask? I am 44 years old and I can get $1,000,000 of term life insurance that will be with me for 20 years for $87 a month. Now, $1,000,000 is no magic number, I just used it because it's a nice round number and most people should probably have at least that amount of insurance. For less than you are paying for your cell phone service you can protect your family against the terrible financial consequences of a premature death of mom or dad, husband or wife. And what's more important, scanning Facebook on your phone for the latest updates, checking work emails while out of the office, or providing true financial security and peace of mind for your family?
We probably spend more time picking out our new cell phone plan than we do our life insurance. What happens when 48 year old dad passes away unexpectedly leaving mom and three kids? Where are they going to get the money to replace the income he earned? Where's the money coming from to pay the mortgage, buy groceries and pay their cell phone bills? That's what life insurance is for. It's there to provide the income needed for the family to continue their lifestyle without any dramatic changes. If mom was a stay at home mom (or CEO of the house as I call her) she's extremely busy running kids to and from school and sporting events and extracurricular activities and just keeping the house running smoothly. Does she really want to be forced to have to go find a job outside the home to earn money? My wife is the CEO at our house so I know that the household CEO position is already a full time job. And what about the lifestyle impact on the kids if mom has to do this.
And it's not just dad. What if mom dies? Who's the household CEO now? How does everything get done? Dad still needs to work to keep the bills paid. Mom needs life insurance too so that if she dies there will be money to hire people to do what she does. I know friends and family will pitch in and help out, but that can only go on for so long and is not a permanent solution.
But I'm young you say. Can't happen to me. I get that. It always happens to someone else. Until it doesn't. I personally know of two people in their 40s who passed away within the last month. One was a good friend who battled a long-time illness and the other was a client of our firm who passed away unexpectedly. Financially, the circumstances of how you or your spouse die won't matter. What will matter is that you and your family did the proper planning to make sure those that are left behind are taken care of financially.
I'm certainly not saying don't have a cell phone. They are an integral part of our lives today. But go review your life insurance. See how much you have. And then see an independent professional that can help you determine how much you need and help you get it. An independent professional can help you shop among many companies for the best rates. Try to avoid using a captive insurance agent –that's an agent that represents or works for only one insurance company. They will only have their own company's products to sell you and they will often be more expensive.