Ask Chuck: Do I have enough life insurance?

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Dear Chuck,

With the coronavirus panic everyone seems to be focused on stocking up on face masks, hand sanitizer and toilet paper. For me, I’m not sure I have enough life insurance. How much do you recommend that I buy and when should I purchase some? 

Preparing for the Worst

Dear Preparing for the Worst,

I heard on the radio today that fear is far more contagious than the coronavirus. Fear certainly seems to have infected millions of people across the world evidenced by some of the behaviors you listed in your question. While your concern is very legitimate, there are many other reasons and motivations to be sure you have adequate life insurance; so I don’t want you to make a rash decision driven by fear to buy a policy based upon the highly unlikely event that you will contact the virus and die.

By the way, I don’t think having insurance is a nullification of faith in God. It is wise to be properly insured; therefore, even apart from this virus threat you probably should get proper insurance as soon as possible.

Good Reasons to Have Life Insurance

The average man leaves far less than minimum assets necessary to provide for his family upon his death. That includes total life insurance. Some reasons include ignorance, slothfulness and debt. Most Americans have not been taught good stewardship (which includes preparing to leave an inheritance) and many know what to do but procrastinate until it’s too late. Debt, often a priority problem, keeps many from finding affordable life insurance.

Unless the Lord returns first, we will all die. Talking about death neither hastens nor delays it; it only makes it easier for those left behind if you rationally prepare for the inevitable.

“The simple believes anything, but the prudent gives thought to his steps.” (Proverbs 14:15 ESV) A great reason to have adequate life insurance is to be prudent and take care of your family’s needs.

Another reason is to ensure your heirs have an inheritance in the event of your untimely death. God leaves no subject untouched in His Word, including inheritance. In biblical times, the sons inherited their father’s properties and provided for the rest of their family. What’s not so obvious is that in most instances, the sons received their inheritance while their fathers were still living. This enabled a father to oversee their stewardship while they were learning.

●  “A good man leaves an inheritance to his children's children…” (Proverbs 13:22a ESV)

●  “House and wealth are inherited from fathers…” (Proverbs 19:14a ESV)  

I’ve carried term life insurance since our first child was born and carried some (but a lesser amount) on my wife. This policy allows for a tax-free sum of money paid to a dependent after one’s death, providing financial security for a spouse or dependents faced with numerous decisions and possible lifestyle changes when death occurs. It is a means to pay bills and provide for future expenses depending on the dollar amount and management of the dependent.

If you have a mortgage, debt, minimal savings and dependents, you should have life insurance. Honestly answer this question: “Will my death impact anyone else’s finances?” If so, get more specific to determine how best to be prepared.

Define your Scenario

●  Married? Childless? Do you depend on both salaries to pay the bills?

●  Is there a stay-at-home parent involved? She/he may need coverage because death would make child care necessary.

●  Average life expectancy of past family members.

How Much to Buy

●  Enough to cover your debt: mortgage plus all outstanding debt

●  Future provision for children: college, wedding, down payment on a home

●  Final expenses: average funeral expense of $7,000 up

●  Extra provision: vacation, emergency fund, savings

●  You can buy more later if your health remains good

●  Don’t buy more than you can afford. The company can cancel your policy and leave you stranded without coverage.

A basic calculation is as follows. Total your assets and then subtract the total of your current and future financial obligations. Include all debt: mortgage, student loans, credit cards, etc. Add in estimated funeral and burial costs. To cover future needs, add in the cost of cars, education, weddings, etc. This will give you a rough estimate. This calculator may help, along with this sample worksheet.

Several websites show the average cost of rates by age, term and policy size. You can get a general idea of what a policy would cost based on your specific needs.

The younger and healthier you are the lower your premiums will be. Smokers pay a significantly higher price – one of the many reasons not to smoke. Certain health issues may make you a greater risk and result in higher premiums. Just know there are options available. Simply educate yourself prior to pursuing and do not procrastinate.

Not everyone needs insurance. This includes some singles, the financially independent, those without large debt, or those who own property or a business that can be liquidated upon death.

Term or Whole Life

Term insurance is fairly inexpensive and provides coverage for specific time frames of 10 to 30 years. In essence, this is like renting a policy in that you are not building any equity with your payments.

Whole life or permanent insurance can be costly and complicated. It’s designed to provide protection no matter how long you live which has significant benefits. And, this policy is capable of building equity.

Sometimes employers provide coverage. But, you can buy it yourself through insurance brokers and agents. Seek the advice of friends so you work with a reputable person and company.

Costco and AAA offer term life for members as well as thousands of independent, reputable firms who have excellent reputations for caring for their clients. Consider travel insurance in the event of death while traveling or living abroad.

After You Become Insured

If you do buy insurance, it is important that you keep the policy paid up and the contact for the policy is stored with your other financial records so that your heirs know how to file a claim and receive the money. Every year, millions of dollars of benefits are left unclaimed.

We have a friend who became ill, was hospitalized several weeks, and died. During the weeks of his illness, his policy expired but it was not discovered until after he died. It had devastating ramifications for his wife and college-aged children.  Keep your premiums paid and up-to-date.

Make sure you have a legal will in place. Then have your spouse and dependents get training in Biblical stewardship. This will prepare them to be wise with money regardless of whether or not they have to deal with your premature death

Paul told Timothy: “Anyone who does not provide for their relatives, and especially for their own household, has denied the faith and is worse than an unbeliever.” (1 Timothy 5:8)

It sounds harsh, but God wants us to steward wisely, not simply for our own benefit but for our loved ones as well. Thankfully, you don’t have to do it alone. Talk with some wise people, fill out this free worksheet, then work through our Planning Your Legacy Guide. The sooner you start the better.

Finally, join me and all of us at Crown in praying for those who are being impacted by this deadly virus and for containment to occur very soon. Thank you for contacting us.