Most people today realize that they need to have life insurance. It’s no longer in the “well maybe” column but for most people it’s in the “get it done” column. Certainly, we know that when we die there is an expense attached because you can’t bury your cousin Fred in the woods. There are laws about disposing human remains and unfortunately, there can be a substantial cost associated with a proper burial or cremation.
If you’ve ever been involved with arranging a funeral or helping to pay for one, you should be intimately aware of how much money is involved. Unless your deceased friend or loved one had a life insurance policy, those costs are going to pass to the surviving loved ones. It’s doubtful that there are many things worse than to have to borrow money or pull it from your savings account while you’re grieving the loss of a loved one or close friend.
What’s the Average Cost of Funeral Today?
Like any other product or service, there are moderately priced funerals and there are expensive funerals. And like any other product or service, the total cost will depend on the “bells and whistles” that are added to the basic service. For the purpose of this discussion, however, let’s look at the average cost for burying a friend or loved one.
FuneralWise.Com, which is an established resource for funeral planning lists the average cost of a typical funeral service or cremation as follows:
The average cost of cremation with a traditional funeral service(the casket is present and you have a visitation) is $10,000-$12,000.
The average cost of cremation with a memorial service(takes place sometime after the cremation, the casket is not present, and does not include a visitation) is $8,000-$10,000.
The average cost of cremation with no funeral or memorial serviceis $2,000.
The average cost of burial with a traditional funeral service(visitation and the casket is present) is $15,000.
The average cost of burial with a memorial service(no casket, no visitation) is $10,000. Read the Article
Knowing the cost of your funeral in advance certainly provides a starting point on how much life insurance coverage you should purchase. If your life insurance purchase is intended to pay for your funeral and burial, then according to the information above $10,000 to $15,000 should be sufficient.
What if I Want to Purchase More than just Burial Insurance?
There are many reasons to buy life insurance, especially if you are the primary earner in the family. If you consider just for a moment how the loss of your income will actually affect your family, a $10,000 burial policy will be way short of your family’s financial needs. Let’s take a look.
Understanding your actual life insurance needs can be easily calculated by using an insurance needs analysis calculator. There are many of these calculators on the web that will take all financial matters into consideration when calculating your family’s financial needs if your income is no longer available to them.
The insurance needs analysis calculator will take into consideration your survivors’ income needs, expenses and debts, and savings and assets. This type of analysis takes into consideration all of your surviving loved one’s needs for a time period that you choose.
We recommend that you access an online insurance calculator or better yet, have an experienced and reputable agent calculate this for you during a brief interview. If you choose to go it alone, John Hancock Insurance has a life insurance calculator that will help you determine how much insurance you realistically need.
What if I Can’t Afford the Amount of Insurance I Need?
Believe it or not, you probably can. You just have to look at the different types of life insurance that will best fit within your budget. Here’s an example:
Let’s use John Jones as an example. John has done an insurance needs analysis and discovered that he really needs $685,000 in life insurance to take care of his spouse and two children in the event of his death. John is a 30-year old male non-smoker in very good health. Here are John’s options:
20-Year Term Life Insurance: $25.68 per month
Universal Life Insurance: $336 per month
Whole Life Insurance: $610 per month
Certainly, John can likely afford the $25.68 premium for the Term Policy. He can also convert some or all of the coverage to permanent life insurance before the end of the term without having to worry about any health conditions that may have come up.
If John feels like Term insurance is a waste of money, then he should consider the Universal Life policy that builds cash value or he could cover part of the needed death benefit with Universal Life and the balance with Term Insurance. Doing so will reduce his combined monthly insurance premium to a more affordable amount.
If John is more concerned about policy guarantees and the monthly premium is not an issue, he may want to select Whole Life Insurance which cannot be canceled as long as he pays the premium and it will build cash value over the life of the policy. Or, John may want to combine the Term insurance with the Whole Life coverage to reduce the monthly premium or a mixture of all three.
It’s important for consumers to know that permanent insurance policies like Universal Life or Whole Life build significant cash value over time and they will have access to that cash whenever it’s needed, no questions asked.
If You Know You Need Life Insurance, why Don’t You Have Any?
Over time, you would think more and more Americans would be buying life insurance, especially since the insurance companies advertise now more than ever. Unfortunately, such is not the case. In fact, there are fewer people with life insurance now then there were in 1984. Statistics today indicate that only about 60% of Americans carry life insurance and a large portion of those Americans get their life insurance through work which is typically woefully inadequate.
It’s great to have insurance through your employer, but in most cases, it’s never enough and when you leave, your insurance doesn’t follow you.