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(BPT) - More than half of Americans who own life insurance say they purchased it primarily to cover final expenses if something happens to them, according to the 2016 Life Insurance Barometer study. Yet one in four also say they don’t think they have enough life insurance — and the mistaken assumption that life insurance is just for paying final expenses could explain why so many are underinsured.
While survivors certainly can use life insurance benefits to pay final costs, or to help replace lost income, life insurance proceeds can also fund other important financial objectives. Many of those goals cost far more than covering end-of-life expenses.
Here are five financial goals that life insurance can help fund for your loved ones after you’re gone:
Raising a child born in 2015 to age 17 will cost a family more than $284,570 for basics like food, shelter and other necessities, according to the USDA and data from its Consumer Expenditures Survey. That figure does not include college tuition. Costs for special needs children can be even higher.
“Life is hard enough when you lose someone you care about, and financial stuff doesn’t make it any easier,” says Ryan McNany, whose mother, Mickey, passed away from colon cancer. McNany’s daughter, Mary, has Down syndrome, and had a special relationship with her grandmother. Their story is featured in Prudential Life Insurance’s Masterpiece of Love video series.
“Mom didn't have a lot of life insurance, but what a gift to be able to have some insurance to help ease the burden,” McNany says. “I'm grateful that Mom had a little bit.”
A four-year college degree can cost more than $100,000 for tuition only, according to data from the National Center for Education Statistics. Factor in food, books, housing, transportation and other expenses and it’s easy to understand why the Institute for College Access and Success says that seven in 10 college seniors graduate with more than $30,000 in student loan debt.
Life insurance proceeds can help fund college educations, even if college is many years in the future for the child. Beneficiaries can invest life insurance payouts in tax-advantaged college savings accounts to ensure funds will be available when the child is ready for college.
The average cost of retirement is more than $780,000, the Motley Fool reports. Retirees with health issues, disabilities or high standards of living may need even more. According to the National Council on Aging, money challenges are common among retirees; 2.9 million senior households suffer from food insecurity, more than a third still owe money on a mortgage, and more than 61 percent have some form of debt.
Life insurance proceeds can pay off mortgages and other commitments to allow senior survivors to live debt-free, and can be invested in tax-advantaged retirement savings vehicles to help ensure retirement income.
After receiving a diagnosis of multiple sclerosis, Dawn Fitch knew she needed to protect the future of her bath products company. Fitch had lost her own father, a lifelong entrepreneur, after a lengthy illness. She knew firsthand the impact such a loss can have on a business’s ability to continue operating and supporting surviving family members.
“People have invested time, money, energy into this business and into me, so I feel a responsibility to make it work,” says Fitch, whose story is featured in Masterpiece of Love. “I need to really make sure that this business, if I'm not here or if I can't do anything, can run independent of me. Life insurance is peace of mind, and life insurance will help me take care of my family if I'm not here.”
Leaving a legacy
When he was just 10 years old, Hal Williams lost his father to a heart attack. “My mother was still working and my father’s little bit of life insurance helped keep food on the table, a roof over our heads and us going,” recalls the host of the Masterpieces of Love series. “When I had my own family, having plenty of life insurance for all of us was of singular importance."
Williams’ loss of his father at such an early age, and the security life insurance helped bring his family, inspired his role in the video series.
Life insurance benefits can leave a legacy for survivors, whether it’s helping provide basic financial security, pay for college, start a business or fulfill a dream. To learn more about life insurance and to view more inspiring stories, visit https://www.prudential.com/thedrisin.