"Life insurance is the ultimate love letter," says Blair Aaronson, founder of Retirement Thru Design. "I always ask a client to write a letter to their loved ones that will be placed in the policy. When that individual passes away, it is in that moment of ultimate grief that those words are felt at the soul level. I have delivered death benefit checks that enabled children and grandchildren to attend college of their choice or to pay off a home mortgage and to allow a spouse to continue a lifestyle that could never have been sustained otherwise."
If you die, your income dies with you. Yes, you're more than an income to your family. But that income is important: it allows your family to sustain a particularly lifestyle and it also allows you and your spouse to build your nest egg. If you're not bringing in an income – say you're a stay-at-home parent – your economic contribution is still crucial and needs to be protected. Life insurance is the best way to protect your family. Here's how, in chronological order.
Funerals are expensive. The average funeral can cost upwards of $10,000 (including embalming, casket, and gravesite). Additionally, if you were sick when you died, your family may be responsible for covering medical bills. Life insurance payouts can also help cover the cost of a grief counselor or therapist for your spouse or children. Having life insurance can make the mourning process slightly easier to bear by allowing people to grieve without having to worry about money.
After the funeral expenses are paid, your family will have to concern themselves with other costs. Life insurance can pay off specific debts, help complete long-term savings goals, and work to help your family pay for day-to-day expenses.
A few examples of where a life insurance policy can be useful:
A life insurance benefit can be used to pay off your mortgage. This gets rid of a huge debt burden and frees up your spouses' income to go towards new expenses like childcare or old expenses like your household bills.
Speaking of childcare, your life insurance benefit can also be used to pay for additional or existing childcare needs. It's up to you to decide how much you want to put aside for childcare. If your children are very young, for example, you may want to put more money into this pot.
Your life insurance benefit can also be used to pay for college. Assuming you're using a college savings plan, that money could grow into an even larger nest egg, allowing your child to dream big when choosing their college.
Remember that a life insurance benefit is a tax-free lump sum of money that can be used for anything. Does your family have a specific, uncommon need that we didn't address here? Don't worry — your life insurance benefit can cover that, too.
One way that people use a life insurance benefit is to put some of it aside into an investment or savings vehicle. This money then grows over the next decade or two until it can be used for something big: your child's wedding, for example, or an inheritance for their post-college years.
These examples don't necessarily fit into the idea of "protecting your family" or their finances, but they do speak to a desire to have a lasting impact on your children's lives if you die prematurely.
Life insurance helps you plan accordingly and think about all costs for the present, near future, and distant future. Buying life insurance today allows you to provide and protect your family tomorrow, even if you’re not around. And while it’s sad to think about missing monumental milestones, it is comforting knowing that through your life insurance benefit, you’ll be able to provide for your family and relieve them of financial burdens.