Life is good.
Most people, including me, like to live life in the fast lane. We get caught up in early mornings, schoolwork, rush hour traffic, and working overtime. We spend our free time on social media, surfing the web, binge watching TV shows. Sometimes, it is nice to slow things down and appreciate the most important things in life. Sometimes, less is more. With less, we learn to have greater appreciation for our friends, family, and the privilege of being alive and well.
I think the COVID-19 outbreak has really highlighted these important things. Families and friends are prohibited from meeting with each other and we all have slowed down our lives. I’ve had some time to reflect, and I think about how much I care about my family—my wife, my parents, and my brother. What would I do without one of them? Maybe a better question is “What would they do without me?”
That is why I have a plan in place in the form of life insurance. Not because they wouldn’t be able to be financially stable without me, but because if something happened to me and I didn’t make it home one day, I would want them to know how much I cared about them. No amount of money could ever replace me in their lives but having more money never has caused anyone to have more stress.
Well how much life insurance does someone need? Where do I get life insurance? It sounds expensive. Do I even need it at all? What are the types of life insurance? These are questions I hear all the time. Many professionals argue about the rationale behind what type and amount people should have. Some say that everyone should have 10-12 times their yearly income. Other solutions involve complex planning tools. Let me tell a story to illustrate the truth.
Dave and Allison have been a happily married couple for 15 years. They have 3 kids—Jimmy, Jane, and Julie. They both make $50,000 a year. They have a $200,000 mortgage and $7,000 in student loan debt that they cosigned with each other.
They had just arrived back home from a family vacation. As they were unpacking their bags, Dave started to complain about shortness of breath and some chest pain. He shrugged it off and continued to go about his evening. The next morning, Dave and Allison go back to work after taking their kids to school. On Allison’s way home from work, she got the call. Dave wasn’t going to make it home that day. Dave had a heart attack while driving home from work and was pronounced dead at the scene.
Allison and the kids were heartbroken. How could they go from having a wonderful family vacation to complete devastation in one day? How could the kids ever go back to normal after their loving father was gone? Shortly after Dave’s death, Allison realized there was another problem formulating. She has to raise 3 kids, pay off the mortgage, pay for Dave’s funeral, and attempt to put the kids through college with half of the income they had before! Troubling thoughts went through Allison’s mind. Would she have to sell the family home and move to a smaller apartment? Would she have to get a second job on nights and weekends to help pay the bills? Will the kids be able to go to college and graduate debt free like she hoped?
A week after Dave’s funeral, Allison gets a call from a stranger. The stranger introduces himself as a financial planner. The financial planner gives his condolences to Allison’s loss. He then goes on to explain that Dave cared about his family so much that he wanted to make sure everything was okay if something were to happen to him. Ten years ago, Dave had sat down with this planner, listened to his recommendations, and purchased a $1,000,000 life policy. The planner explained how he was going to meet with Allison, help her pay off her mortgage and her other debt, help put the kids through college, and invest the rest in a way where she can withdrawal a paycheck every month for the rest of her life. So even though Allison and the kids will never be okay again without Dave, financially they will not suffer.
So how much life insurance do you need? Absolutely none. Nobody needs life insurance. Even if you know you are going to die, you don’t NEED life insurance! Dave didn’t need life insurance. It’s all about what you WANT. Talk to a financial professional about the things you want and they should help you plan for the worst.
If you have financial planning questions, please schedule a free online appointment with Powercat Financial today via Zoom or telephone via the link at www.k-state.edu/powercatfinancial! While Powercat Financial cannot provide investment and insurance advice, we can help you create personal financial goals and consider next steps towards reaching those goals!
Peer Counselor II