If you’re lucky enough to have a partner or kids, your responsibility extends beyond paying the bills and bolstering your savings account. Your job probably includes sandwich-making, thunderstorm-comforting… and making sure your family can stay comfortable and meet their financial goals in the event of your absence.
Purchasing a life insurance policy is one important but simple way to protect your family from the added stress of a financial burden if anything happens to you. September is Life Insurance Awareness Month, so we wanted to take the opportunity to focus on how life insurance works, and why it really matters.
A person who purchases life insurance makes monthly premium payments in exchange for a guarantee that insurer will pay out a lump sum to designated beneficiaries in the event of their death. That means that as long as all your payments are up to date (and you meet the requirements you agreed to when you bought the policy), your loved ones will receive money if you were to pass away. They can use this to cover daily living costs, final expenses, debt repayment or whatever else they need.
Term life insurance provides a death benefit to your beneficiaries while your policy is active. Usually, people have a need for life insurance during the first 20 or 30 years of their kids’ lives, after which point their children may be more financially independent. Because term life insurance only covers a specific period of time, it’s generally much more affordable.
Whole life insurance, on the other hand, is active for a person’s whole life. While whole life insurance has the potential to build cash value, which a person can withdraw from, it has its downsides, too. Namely, whole life insurance is usually more complex and much more expensive.
What type of life insurance policy someone purchases depends on their financial situation and goals. The most important thing is to think ahead about how your loss will impact the people you care about—and to make a decision about how you want to protect them if you’re not around.
To truly understand the difference life insurance can make in someone’s life, it’s best to speak to those with firsthand experience. In honor of Life Insurance Awareness month, we spoke to three different people whose lives were deeply changed by life insurance.
Angela’s husband died suddenly in 2015 (that’s not her real name, as she asked us to protect her family’s privacy). Along with insurmountable grief, the loss brought on the increased burden of parenting her two young kids alone—including financially providing for them. That’s because her husband’s job didn’t have life insurance benefits, and he hadn’t bought an individual policy for himself. “My husband’s death was traumatizing enough, without the addition of financial stress,” she says. “I can’t imagine what that process would have been like had he purchased a life insurance policy.”
While Angela’s full-time job made ends meet, she didn’t have extra money to buy a house or save for her kids’ college. She and her family lived month to month for several years, until she finally received a promotion that allowed her more financial freedom.
Today, Angela has a policy of her own to protect her kids if the unimaginable happens. She sees it as the least she can do to ensure their well-being. “If anything happens to me, the last thing I want is for my children to worry about money,” she says. “Loss is hard enough without financial stress.”
Amanda (another pseudonym, per her request) was living far from home in a big city when her father passed away suddenly and unexpectedly. At the time, she and her husband were both unemployed and on food stamps, unable to pay their costly student loan bills. “I was just shy of my 25th birthday and financial stress had my hair falling out by the handful,” she says.
While she was emotionally shaken by her father’s death, it also gave Amanda and her husband an unexpected gift: $250,000 in tax-free money because she was his life insurance beneficiary. With it, Amanda paid off her student loans and even bought a house without a mortgage. More than a decade later, she and her husband don’t carry any debt. “I even had enough left over that, when our first kid came along, I could afford to leave my job and do the stay-at-home parent thing,” she says.
Because of their own new family, Amanda and her husband both purchased their own life insurance policy. “God forbid anything happens to either of us, but if it does, we’re buying the privilege to mourn without immediately worrying about jobs and how we’re going to be able to feed the kids.”
She says, “It's peace of mind and freedom from financial stress for the one left behind, to let us focus on surviving grief and helping our two children navigate their own journeys through that emotional onslaught.”
Greg Van Horn grew up in a middle-class family in New Jersey. Because his dad had a great job as a clinical researcher at Johnson and Johnson, his mom had transitioned from the corporate world to be a full-time caregiver to Greg and his two younger brothers.
He was only eight when his dad died unexpectedly from colon cancer. Of course, Greg had no idea what life insurance was, or that his dad had a policy, which he now guesses was worth around $1 million. “His life insurance policy would be the safety net my mom needed as a now-single mother of three young children,” he says.
While the following years were painful and stressful, he doesn’t remember finances adding to that burden. Thanks to the life insurance payout, his mom never had to go back to work, and his family lived free from major financial burden.
Greg’s childhood inspired him to make the same difference in others’ lives.
He currently works as the CEO of FinanceBuzz, helping other people achieve the same financial independence his mom had thanks to his father’s life insurance policy. “Without the life insurance my dad had set up, giving our family financial protection when the worst-case scenario happened, my life would have gone in a very different direction,” Greg says. “I can’t thank him enough for having the financial wherewithal to put that into place for us.”
You, too, might benefit from life insurance if you’re a parent or anyone depends on you financially, if you own a business or have debt, or you want to leave money behind to people you love. Nobody expects the unexpected, but a small investment in term life insurance now could change someone’s life down the road.
Fabric exists to help young families master their money. Our articles abide by strict editorial standards. This article has been reviewed and approved by a compliance professional who is a licensed life insurance agent.
Fabric by Gerber Life exists to help young families master their money. Our articles abide by strict editorial standards.
Information provided is general and educational in nature and is not intended to be, and should not be construed as, financial, legal, or tax advice. Laws of a specific state or laws relevant to a particular situation may affect the applicability, accuracy, or completeness of this information. Federal and state laws and regulations are complex and are subject to change. We make no warranties with regard to the information or results obtained by its use, and disclaim any liability arising out of your use of, or reliance on, the information.
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Term Life Insurance Policy Series ICC22 2205-4004 WSA and Accelerated Death Benefit Rider policy series ICC22 2205-2623 WSA (and state variations where applicable) issued by Western-Southern Life Assurance Company, Cincinnati, OH which operates in DC and all states except NY, and distributed by Gerber Life Agency, LLC using Fabric Technologies. Gerber Life Agency, LLC is an affiliate of Gerber Life Insurance Company (est. 1967). All are members of Western & Southern Financial Group (Western & Southern). Issuance of coverage for Term Life Insurance is subject to underwriting review and approval. Please see a copy of the policy for the full terms, conditions and exclusions. Product provisions, availability, definitions and benefits may vary by state. Payment of benefits under the life insurance policy is the obligation of, and is guaranteed by, the issuing company. Guarantees are based on the claims-paying ability of the issuer. Products are backed by the full financial strength of the issuing company.
All sample pricing is based on a 30-year old F in Excellent health for the coverage amount shown and a 10-year term policy, unless otherwise stated. Gerber Life Agency, LLC (GLA) is an insurance agency licensed to sell life insurance products. GLA will receive compensation from Western-Southern Life Assurance Company for such sales. The NAIC Company Code for Western-Southern Life Assurance Company is 92622.
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