Not just for men

Not just for men

Whether a mother works outside the home or dedicates her life as
a homemaker, women are less likely than men to have life insurance,
and if they die, their families could be thrown into financial
chaos.
Whether a mother works outside the home or dedicates her life as a homemaker, women are less likely than men to have life insurance, and if they die, their families could be thrown into financial chaos.

“Underinsuring the female, whether she is a working or stay-at-home mom, makes no more sense than underinsuring the male. There are just too many uninsured couples putting their families at risk,” said Beth Wood, assistant vice president of business and women’s markets at Massachusetts Mutual Life Insurance Co.

But many families, especially in today’s economy, don’t think they can afford even the basics.

“When I was married, we never had life insurance,” said Ruby Campbell, a Nampa, Idaho, mother of a 15- and 12-year-old. “When you marry young, you feel like you don’t need it. We thought, ‘That’s for old people, when you’re getting ready to die.’ “

“We thought about it a few times, making a will and all that. But when you’re young and have kids, everything else takes precedence – you need diapers, you need milk,” Campbell said. “My husband didn’t think there was a need for it. He thought you pay way too much for insurance and you never use it. He thought it was a waste.”

But after getting divorced eight years ago, Campbell started thinking about the future of her family.

“You start thinking, ‘If something happens to me, what’s going to happen to my kids?’ ” she said. “When you’re a single mom, you don’t have anybody. What if something happened?”

And even if the father is supporting the entire family, it might not be enough if something catastrophic were to happen to the mother.

“If a woman dies or becomes disabled and cannot work or take care of the family, her husband may have to cut back his hours to stay at home or hire someone to care for the children, and that makes financial matters worse,” Wood said.

Almost two-thirds of today’s families depend on two incomes to make ends meet, according to the latest figures from the Bureau of Labor Statistics.

“If you died suddenly, could your family maintain their standard of living – pay off debt, save for college and set aside money for retirement – on your husband’s income alone? Probably not,” said Marvin H. Feldman, president and CEO of the LIFE Foundation, the nonprofit life and health insurance foundation for education.

Women who do not work outside the home also bring extraordinary value to the family, Wood said. According to the May 2009 Mom Salary survey from Salary.com, a stay-at-home mom brings $122,732 in services to the family each year – from cooking and cleaning to shopping, shuttling children around and a range of other domestic duties.

“If something were to happen to a stay-at-home mom you would still have to replace her contribution to the household,” Wood said. “She may not work outside the home, but she works inside the home, and the cost to pay someone to do what she does is huge.”

It can be difficult for families to discuss the sensitive issue of life insurance, and many women are uninsured or underinsured because families don’t want to talk about what will happen and how the family will pay its bills if the mother dies.

“People don’t generally deal with this difficult issue,” Wood said. “It’s the last thing they want to talk about, so stereotypes and misconceptions get passed on from one generation to the next.

“People may make the same decision their parents made – they believe the man is the breadwinner, and that is the only income you protect. That is a very risky practice.”

Campbell was always led to believe life insurance was only for the wealthy or those with a lot of investments.

“When you come from a blue-collar family, you don’t see a financial planner or talk about any of this stuff unless you have money,” Campbell said. “When I was thinking about meeting with a financial adviser, I told him, ‘I have nothing,’ and he said, ‘That is why you need to see me.’ “

For Campbell, that was enough to get the ball rolling and start planning for her family’s future.

“If there’s a place you want to be, make sure you talk to somebody that is in that place,” she said. “If you see someone who is secure financially, talk with them or listen to what they say if they offer you advice, because that’s where you want to be.”

Although most people recognize the importance of life insurance in financially protecting their families, many need significant help in determining the type and amount of coverage appropriate at different life stages, according to the National Association of Insurance Commissioners.

Insurance rates are frequently based on the age and health of the insured, so Wood recommends getting started as soon as possible.

“Pensions are starting to go away; we don’t know what the future of Social Security is. There isn’t anyone else out there who will take care of us,” Wood said. “So we need to take care of ourselves. The cost of waiting is going to kill you.”

Campbell has had to cut back on her weekly family outings in order to pay $40 per month for her convertible-term life insurance policy, but the minor adjustment to her family budget has been worth the peace of mind, she said.

“I didn’t realize how much I actually worried about it,” Campbell said. “It’s always in the back of your mind, but you never really sit down and talk to someone about what you need to do. But what a load off my shoulders. If I die tomorrow, my kids are going to be OK.”

WHAT YOU SHOULD KNOW ABOUT LIFE INSURANCE

According to the Idaho Department of Insurance, there are three life insurance basics that all consumers should consider:

1. Start by considering how many people are financially dependent on you, what their major expenses are likely to be and whether you’re likely to leave them with substantial debts or taxes to pay on your estate. Life insurance can help on all of those fronts.

2. Evaluate the two main types of insurance: term and permanent (or whole life). As its name implies, term life insurance pays a death benefit if you pass away within a specified time period (typically a term of one to 20 years). In contrast, permanent life insurance (which comes in many varieties such as whole life, universal life and variable life) includes both a death benefit and the ability to build up cash value over your entire lifetime.

In general, term life insurance is much less expensive than permanent life. In fact, term life premiums have decreased markedly during the past decade due to the fact that Americans are living longer on average. Consumers who purchased their policies more than a few years ago should check out current rates. Also, consumers should ask whether the policy they are considering charges a surrender or cancellation fee if they decide to drop the policy or switch to another one.

3. Understand the major factors that can affect life insurance premiums. Some are uncontrollable, like the age at which one purchases a policy or a serious pre-existing medical condition, like cancer or heart disease. Other factors are much more dependent on an individual’s behavior, like poor health habits (e.g., smoking or excessive drinking), driving record (e.g., accidents and driving while intoxicated citations), engaging in dangerous hobbies (e.g., sky diving, car racing, or rock climbing), and even where one lives, since mortality rates in a geographic region may be used by life insurance companies to help establish premiums.

LIFE INSURANCE TIPS FOR EACH LIFE STAGE

Young singles who want to be sure they can get life insurance later in their lives when they may develop health problems should consider purchasing term life insurance that is guaranteed to be renewable. They also may want to consider a term policy with a conversion option, which enables them to switch, for a set fee, to a cash-value policy at a time when they have more money. Those serving in the military should consider Servicemen’s Group Life Insurance, low-cost term life insurance available to all those in active duty.

Young families should consider purchasing life insurance for both spouses, even for a non-working spouse, to help pay for child care and other domestic services. At this life stage, term insurance may be the most cost-effective when their salaries are still relatively low and they’re paying off a mortgage. Some parents purchase small life insurance policies for their newborns to guarantee that they’ll have some insurance if they develop health problems.

Established families should consider the probable costs of their children’s college education when determining how much life insurance they may need.

Empty nesters/seniors should evaluate whether they can reduce their life insurance coverage based on such factors as whether their spouse is alive, their home paid off, their children and/or grandchildren are financially independent, or if they anticipate high estate taxes that would be a burden on their heirs. Some older individuals with significant financial assets may choose to keep their life insurance in force because they view insurance as an estate planning tool that enables them to leave their loved ones money that is exempt from income and estate taxes.

All consumers should review their life insurance policy annually before paying their premiums and update it, if necessary, to reflect any major life changes such as marriage, a birth, divorce or a death.

Also, before signing up for any kind of insurance, consumers should check with their state government to make sure the company offering the policy is legitimate, solvent and authorized to do business.

WHAT ARE YOUR OPTIONS?

Do some online research to help you find out what is best for your family’s short- and long-term goals. There are lots of Web sites, such as www.SmartMoney.com, that can help you get started. Most financial experts recommend purchasing term life insurance rather than whole life insurance.

– Term life insurance: “So called because it covers policyholders for a fixed span of time, this is pure life insurance,” according to SmartMoney.com. “It always costs much less than whole life policies for everyone except the very advanced in age.”

– Whole life insurance: This option “combines term insurance with an investment component,” says SmartMoney.com. Most experts suggest doing the math to see if the policy’s investment portion makes such a policy worthwhile for your goals.

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