Yes, you do. Whether you are a single parent or married, with one child or several...you need life insurance.
Over the past few months, we have been touched by the tragic deaths of young parents in our community. All of them were in their 30s and all passed from tragic, unexpected health issues or accidents. They all left families behind.
I think when we hear these stories we wonder what we would do if it happened to us. I know some of my first thoughts are about the financial struggle a family can face when the main source of income stops suddenly.
In my opinion, life insurance is something that everyone must have. It provides a financial cushion to lean on in an otherwise devastating time. No one wants to think about losing a spouse but I think it's smart to consider how your life would change and what you would need to provide for yourself and your children.
These are some basic questions to ask when considering life insurance:
- Who is the main source of income for your family? How much would you need to pay for expenses for 3-6 months if that income was suddenly gone?
- Would you need to pay for child care that you don’t currently pay for?
- If you currently do not work, do you think you could find a job that would pay your bills if your spouse died unexpectedly? If not, you need to consider a financial cushion to supplement a reduced income.
- Average funeral costs range from $6,000-$15,000. Plan for it.
No one wants to think they will be in this situation. I know that the people we know who lost loved ones didn’t see it coming. Having some financial planning in place can bring some peace of mind in an otherwise devastating time. If you don’t have life insurance, I urge you to make some calls and get at least enough to pay for funeral costs and a few months of living expenses. It might make you sleep better at night. I know I do.
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I wanted to comment on this just to raise awareness. I recently lost my husband. I am the major income so we had a larger policy on me and a smaller policy on my husband. A few things that I wish I had understood better when planning life insurance:
Once you become a widow, you will be able to use the married filing jointly filing status for two years. After that time, you will be either single if you have no dependents or head of household if you have dependents. This will significantly increase the taxes that you pay on your income (including income from social security survivor benefits). Your “net take home pay” will be reduced by both loss of the deceased spouses income as well as the higher tax bracket.
Survivor benefits cease the 1st day of the month your child turns 18. This can impact college planning.
Depending upon your income, certain tax credits will also be eliminated (like the education tax credit) as these are based upon income and filing status.
Long story short. Be sure to take into considerations the consequences of your change in tax filing status. The impact can be significant.