Preparing for the Unthinkable: Life Insurance for Those in Their Prime
On Father's Day, a 27-year-old Ohio woman died in a car accident, leaving behind a husband and three young children. In April, a 37-year-old Illinois man drowned in a kayaking accident, leaving behind a wife and two young children.
The unexpected deaths of people in the prime of life age are tragic on their own. But these individuals also died without any life insurance, leaving their families facing financial hardship on top of their grief.
It's easy to assume that if you're young and healthy, you'll be alive next year and the year after that. It's probably true, too. But there are many grieving widows, widowers, relatives, and friends out there who will remind you that the unexpected does happen, and it can leave all kinds of chaos in its wake.
No matter your age or wealth or health, you can spare your loved ones a lot of trouble -- and even save them some money.
Do You Need Life Insurance?
Life insurance actually isn't right for everyone. If no one else is depending on your income, it's not a must-have for you (though a little could help pay for your funeral expenses). But if you help support a household or have dependents, you probably need coverage.
One surprising set of life insurance candidates: college students racking up heavy student loan debts. While they are very unlikely to die young, but one does, his family might end up plagued by debt collectors, as has happened. Federal student loan debt is forgiven when the borrower dies, but some private lenders don't follow the same rule.
The good news is that if you're young and healthy, insurance shouldn't be too onerous an expense. If you're a 40-year-old nonsmoking man, for example, you might be able to buy a 20-year-term life policy that costs you around $30 to $40 per month and pays $500,000 if you die. That's an expense of less than $500 per year.
You Do Need Papers and Plans
If you die without a will, your loved ones may wish you'd had one. It's different from state to state, but your state may end up deciding how your property is distributed. For example, if you're in a committed relationship with someone but are not married, that person may not receive what you would have wanted him or her to get.
A will lets you specify who gets what. You can name your preferred executor, too, so that your most trusted and capable loved one handles your affairs.
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If you have children, you'll also want to be sure to draft legal papers specifying who will be their guardian should their parents die. Failing to do so can leave the decision to default standards -- and your children to someone you may not have chosen.
Gather critical information for your loved ones, too. If you should perish, they'll need to know about the various financial and personal accounts you have, and giving them access to passwords and account numbers can make things easier, as well. (Just make sure these are kept secure.) You'd do well to jot down your funeral and burial preferences, too, so that if the unthinkable happens, they won't have to wonder whether you wanted to be cremated or what kind of casket you prefer.
There are a host of vital documents that most or all of us should have. Living wills and advance health-care directives can specify your preferences should you end up incapacitated and leave loved ones guessing what you would want. (At what point, for example, would you want to be taken off life support? This is another thing no one wants to think about, but it can really happen -- and does, to some.) Trusts and other financial arrangements can be set up to make the most of your money for your future and your loved ones' futures.
Take Action: Here's Help
The kinds of headaches above needn't happen to you or your loved ones if you take a little time to learn more about estate planning and get your financial ducks in a row.
%Gallery-154798%One resource you might want to tap is a free copy of If Something Should Happen: How to Organize Your Financial and Legal Affairs, a 44-page guide put out by the American Institute for Economic Research (AIER). The AIER is offering 10,000 hard copies to the public for free and is offering unlimited free digital copies. Click over to its website for the booklet.
Leaving things up to chance is gambling with your life and your loved ones' futures.
