Life insurance is a significant part of preparing for your family’s financial future, but according to the 2021 Insurance Barometer study, 30 million American households have no insurance and another 30 million are underinsured. That’s approximately half of the households in the country. Here are five risks you take if you don’t have enough life insurance.
1. Your Funeral Costs Are Hard to Cover
The average American funeral and burial costs between $7,000 and $12,0001. If you aren’t adequately insured, the money used for burial cuts into the money your family needs for living expenses and other financial goals. The last thing a grieving family needs is the stress of being in a financial bind.
2.Your Family Doesn’t Have Enough Income
Many household bills don’t change (or change very little) when someone passes away. Your family will still have to pay mortgage/rent, utilities, insurance, school fees, etc. Without a proper plan in place, those day-to-day expenses can become burdensome and put your family in a tenuous financial position.
3. You Burden Loved Ones with Your Debt
Credit cards, mortgages, loans — debt doesn’t go away after death. Collectors can quickly suck your estate dry, and some can then pursue payment from co-signers. For example, if you and your spouse purchased a car jointly, they are still responsible for paying on that debt even if your life insurance proceeds aren’t enough to cover it.
4. Your Financial Goals Won’t Be Met
Do you want to send your kids to college? Do you hope your spouse can retire someday? Want to provide for grandchildren? If you are underinsured, the long-term financial goals you worked toward your whole life won’t be met.
5. You Can’t Tap Into Your Policy in Life
Some policies have a cash value or include riders that allow you to withdraw money if you have a terminal or chronic illness. Some people use this for experimental treatments or the opportunity to make memories with their families during the time they have left. While this cuts into the death benefit, it provides a way to access money when you need it.
Do You Have Enough Life Insurance?
So, how much life insurance do you need? There isn’t a one-size-fits-all answer. It depends on your debt, family situation, long-term financial goals and other factors. This simple life insurance calculator may help you to determine how much coverage you need. A rough idea is typically 6-10 times your annual income. For a personalized recommendation or to talk about increasing your coverage, talk to a Farm Bureau agent in your area.