Term Life Insurance

Term life insurance, though often overlooked, should be acquired by anyone interested in securing true security for their family.

The reason that it is overlooked is that most people do not like to consider the possibility that they may die, and this very fact alone precludes any consideration of what might happen after they die. This essay is an exploration of this topic.

The death of a familie's main breadwinner is a tragedy diffucult to scale. One day the wife and kids are happy, friends come over frequently, and life has a gentle, predictable feel. The next day everything is shattered. The prospect of severe hardship looms, and suddenly there is no financial security.

Loss takes on many unpleasant dimensions when it is a father supporting a family. That is to say, inevitably there is tremendous grief as there would be with any loss, but there is also the stark and very unpleasant reality of financial hardship to anticipate. Only people who have gone through it would be completely familiar with the ensuing horrors, and there probably isn't a single one who doesn't regret not having a life insurance policy in place at the time of death.

Let's take a typical American family of four as an example. The kids are school aged, the mother is 33, and the father is 37. The combined yearly household income is $75,000. The wife works part time and contributes $20,000 of this figure. Monthly expesnse with two car payments, mortgage, gas, food, stuent loan payments, etc., come to approximately $5,000. There is $30,000 in savings.

The husband/father suddenly dies. This event puts the family under instant financial strain for three reasons:

• The funeral must be paid for, and this single expense which averages about $10,000. This knocks down the savings to around $20,000.
• The main source of income is immediately gone.

• The surviving spouse is now put under tremendous pressure. The remaining savings might last another 3 months, but after that her income will not be able to support the family. She is looking at financial ruin.

In all liklihood, she will not be able to maintain the same lifestyle. The house will be sold, she will have to go back to work full time and won't be as available to her children. Leisure activities will be severly curtailed or eliminated altogether. Social status will fall. All in al, a tragedy of epic proportions. A simple 20 year term life insurance policy is all that would have been needed to prevent such misfortune.

If the husband had purchased a 20 year term life insurance policy when he was 30 years old he would have been able to protect his family unitl there were able to at least reach college age. Such coverage would have only cost $25 per month. That is, for a 30 year old, $500,000 worth of term life insurance (20 year term) would have only cost $25 per month.

Had such coverage been in place, the mortgage could have been paid off, the cars could have been paid off, and the family could go on at least in the same house, and with the same lifestyle they had become accustomed to.

You might think that a good portion of the death benefit would be taxed, but this is not the case. Life insurance premiums are paid with after tax dollars which means that death benefits are not taxed. The entire $500,000 would have gone to the surviving spouse, and the tragedy of the dissolution of a family would have been avoided.