I talk to people every day about their finances. As you might imagine, I see a lot of different financial situations. A common situation is families that do not have enough life insurance. Many people take whatever life insurance their employer happens to provide, or maybe they buy a little bit more through work, and they leave it at that. They never really thought about what their family needs, they just signed up during open enrollment at work.
Choosing Between Life Insurance and a Cell Phone
Who do you know who does not have a cell phone? Almost no one, right? High schoolers and senior citizens have them. My 71-year-old dad is even texting me now! And cell phones aren't just phones—we email on them, we text, we look at Facebook, we shop online, we use them as a GPS to find our way to wherever we're going in our car. So we also have data plans and texting plans. According to a study by Cowen and Company, the average cell phone bill is $120 – $148 per month. Now that's an average of the people they surveyed, and every family is different. If only Mom and Dad have phones, the bill will be less than if they also have two kids with phones. The point is we are all paying for cell phones that we cannot live without.
Life Insurance Protects Your Family
I am 44 years old and I can get $1,000,000 of term life insurance that will be with me for 20 years for $87 a month. Now, $1,000,000 is no magic number, I just used it because it's a nice round number and most people should probably have at least that amount of insurance. For less than you are paying for your cell phone service you can protect your family against the terrible financial consequences of the premature death of Mom or Dad, husband or wife. And what's more important, scanning Facebook on your phone for the latest updates and checking work emails while out of the office, or providing true financial security and peace of mind for your family?
What happens when 48-year-old Dad passes away unexpectedly leaving Mom and three kids? Where are they going to get the money to replace the income he earned? Where's the money coming from to pay the mortgage, buy groceries and pay their cell phone bills? That's what life insurance is for. It's there to provide the income needed for the family to continue their lifestyle without any dramatic changes. If Mom was a stay-at-home mom (or CEO of the house as I call her), she's extremely busy running kids to and from school and sporting events and extracurricular activities and just keeping the house running smoothly. Does she really want to be forced to go find a job outside the home to earn money? My wife is the CEO at our house, so I know that the household CEO position is already a full-time job. And what about the lifestyle impact on the kids if Mom has to do this?
And it's not just Dad. What if Mom dies? Who's the household CEO now? How does everything get done? Dad still needs to work to keep the bills paid. Mom needs life insurance too so if she dies, there will be money to hire people to do what she does. I know friends and family will pitch in and help out, but that can only go on for so long and is not a permanent solution. (For related reading, see: Insuring Against the Loss of a Homemaker.)
You Are Never Too Young for Life Insurance
"But I'm young," you say, "Can't happen to me." I get that. It always happens to someone else. Until it doesn't. I can think of many people I knew who died way too early and left family behind. Two that come to mind: One was a good friend who battled a long-time illness, and the other was a client of our firm who passed away unexpectedly. Financially, the circumstances of how you or your spouse die won't matter. What will matter is that you and your family did the proper planning to make sure those left behind are taken care of financially. (For related reading, see: What Is the Best Age to Get Life Insurance?)
I'm certainly not saying don't have a cell phone. They are an integral part of our lives today. But go review your life insurance. See how much you have. And then see an independent professional that can help you determine how much you need and help you get it. An independent professional can help you shop among many companies for the best rates. Try to avoid using a captive insurance agent—that's an agent who represents or works for only one insurance company. They will only have their own company's products to sell you and they will often be more expensive.
(For more from this author, see: 5 Signs You Might Be Living Beyond Your Means.)