It’s stating the obvious to say that many of us are enduring tough financial times right now.  Recession, layoffs and losses in our retirement portfolios and in the value of our homes are causing many families to tighten their belts and forego discretionary purchases.  Unfortunately, many Americans mistakenly conclude that purchasing life insurance, or scaling back their existing coverage, fits in the category of “discretionary” purchases.  Life insurance is even more important in this challenging economic environment. 

Here are some real-life stories about families whose financial security was saved because they owned life insurance:

Ebony and Shanna Blanchard – A Mother’s Wish

When Jackie Blanchard’s husband died at 28 with barely enough life insurance to pay for his funeral, she purchased enough coverage for herself to ensure that her young daughters, Ebony and Shanna, would be fine if something happened to her.  Two years later, she was diagnosed with terminal lung cancer.  Jackie used her policy’s accelerated death benefit provision to finance a home and a car for her daughters and to fund their future education.  Today, Ebony, a recent college graduate, and Shanna, a high school senior, live in the home their mother purchased for them.*

Dean Hoskins – A Timely Change of Heart

It took Dean Hoskins considerable time and effort to convince her husband, Bryan, that he needed to purchase life insurance.  Just a few years later, Bryan was diagnosed with an aggressive brain tumor.  He died six months later at age 32.  With the proceeds from Bryan’s insurance policy, Dean was able to invest in her own business as well as schedule her work hours around her young twin daughters’ needs.*

Dennis Danduran – Valuing Mom’s Contributions

Jodie and Dennis Danduran decided to purchase life insurance shortly after adopting the first of their five children.  Though Dennis was the primary breadwinner, they wisely determined that Jodie, a stay-at-home mom, also needed a considerable amount of coverage because of what it would cost to pay someone to perform all her functions.  That planning made all the difference when Jodie died suddenly of an aneurysm at 39.  The insurance money has allowed Dennis to switch to a job that gives him more time to take care of the kids, and has also been used for living expenses and to set up college funds.*

A recent survey reveals that one in three Americans doesn’t have life insurance, leaving an estimated 77 million Americans financially exposed.  While many of us are concerned about the number of Americans – estimated at 47 million – who have no health insurance, almost a third more lack adequate financial protection if one of the breadwinners in the family were to die suddenly.  The survey, conducted by IPSOS Public Affairs, a leading global research company, found that 34 percent of respondents – split evenly between men and women – are uninsured.  Of those who do have life insurance, one in five (22%) do not believe they have enough.

When asked why they lack life insurance, 43 percent of those surveyed said that coverage was too expensive, with 47 percent noting that the “uncertain economy” is restricting their capacity to purchase insurance.  Another one in four respondents (24%) said that they did not think they needed it, and one in seven (14%) felt that shopping for life insurance was too complicated.**

Meeting everyday expenses is a challenge for many of us these days.  Even so, this is not the time to consider dropping or putting off buying life insurance if a need for coverage remains.  Families with dependent children and single-parent households have the greatest financial need.  If you drop existing coverage or wait until “times are better,” you’ll likely be asked to take another health exam.  At that point, you’ll be older and your health might not be as good as it is today, and you may find it harder to qualify for coverage at an affordable rate. 

Life insurance is most definitely not a discretionary expense, especially if your income is what is helping put food on the table and keeping a roof over your head.  The contributions of a homemaker to the family should not be overlooked, either.  So while it may seem difficult to look beyond the bills that are due at the end of the month, you should maintain your current life insurance or even consider buying additional coverage.  Relying on employer-sponsored group life insurance, which is typically tied to a multiple of an employee’s income, may leave a substantial gap in needed protection.  There’s nothing more important that you can do to secure your family’s future financial security than review their and your need for life insurance. 

The way to do this is to talk with a life insurance agent, and ask him/her to do a life insurance needs analysis.  This type of analysis focuses on your survivors’ financial needs rather than your total future earnings, for example.  When determining the most appropriate type of insurance – term or permanent insurance – your agent should consider the amount of coverage needed, the duration of the need, the amount of disposable income available to purchase life insurance, as well as the self-discipline of the proposed owner and his or her risk tolerance. 

* Source:  The Life and Health Insurance Foundation for Education

** Source:  2005 LIMRA International “Trends in Life Insurance Ownership Among U. S. Households” report

Nancy Tommaso
NT Financial Services