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Costs of a tragedy

Personal Finance | Life insurance for non-breadwinners may be smarter than it seems

Issue: "Summer of '68," Aug. 9, 2008

In the last issue I addressed which types of life insurance make the most sense for different objectives and situations. Frequently, readers are in need of regular "death benefit" life insurance-the kind that pays a lump sum of money to the breadwinner's family at his passing as a means of helping to replace his income. This "term" insurance is usually very affordable and is a valuable tool in faithfully planning to provide for one's family. More expensive "whole life" or "universal life" policies have their place, but usually that place is restricted to situations where the need is likely to outlive a term of 10 or 20 years (i.e., business succession, estate tax planning, etc.).

The discussion above addresses the type of insurance called for in a given scenario; what it does not address exhaustively is who needs to be insured. Most life insurance is purchased on the life of a family breadwinner-the key income-generator in a household. Often insurance is needed on the lives of two people, as many two-income families exist today (far more than did a generation ago when the life insurance industry exploded). But is life insurance only to be bought on the life of the breadwinner, or is there a need to have small amounts on other members of the family as well? This difficult but important question warrants your consideration.

Often a "child's rider" can be added to the main insurance policy a family has on the breadwinner for a token amount of premium expense. In some cases, for as little as $10 or $20 per year in additional cost, a $5,000 or $10,000 death benefit can be added to the policy on the lives of the children in the household. Clearly, there is no need for a large amount of death benefit on a non-income-producing child, and godly parents would never plan for a large windfall of cash in the tragic loss of one of their children. However, adding a rider to your own policy that provides a small death benefit on the lives of your children may be a prudent idea. We know that tragedies happen, and many families would be severely shaken financially by the sudden and tragic loss of a child. Time off from work, funeral expenses, potential medical bills, and burial costs are just a few reasons why a tiny death benefit may be a useful planning tool for your family. Keep in mind that the premium cost addition is insignificant, and that no medical underwriting is required whatsoever. It is a simple and affordable step to take to alleviate some of the expenses in the event of a tragedy.

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In the case of single-income families, there also is a reason to consider a small policy on the life of the non-breadwinning spouse. Though there is no financial income that will need to be replaced, it is entirely possible that time off from work for the breadwinner will become necessary, and that additional overhead will be incurred (childcare, school, help around the house, etc.). Each family's budget will be different, but this conversation is one readers of WORLD may want to have. Ultimately, we take comfort in knowing that God is the giver and taker of life; we just seek to be as good and faithful stewards as we can be.

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