Monday, March 27, 2006

Life Insurance is a Must
Thankfully, The Price Tag is Within Reach

It is always fascinating to see where the discussions contained in the comments section of each post go. The comments from this post, at one point, turned towards a discussion of just how important life insurance is. On top of the pure tragedy of loosing a beloved spouse and parent, are the financial devastation that follows. Bills continue to pile up, and often the other parent is forced into the workforce prematurely and, even then, it is often unlikely that he (or she) will be capable of making up for the lost income.

I can't stress enough how important life insurance is, and not just for the primary breadwinner, but also for a homemaker, whose contributions must also be replaced. And, even a secondary breadwinner should not assume that he or she does need life insurance because that income may not replace the expenses that the family has assumed over the years. For example, a family with an average salaried teacher and a high salaried executive has probably incurred expenses and obligations that cannot be covered by a teacher's salary alone.

The subject of life insurance certainly isn't pleasant to discuss, but with a little practice, the discomfort wanes and the discussion becomes just another routine topic. But, be warned, chances are that if you haven't taken out life insurance and want to discuss the necessity of doing so, the ice will be a bit tough to break in the beginning.

Unfortunately, I know some people that are sorely mistaken in their views regarding both life insurance and health insurance and believe that taking out these policies demonstrates a lack of bitachon. Fortunately, the proper approach as delineated by our gedolim falls on the side of common sense. For more information on the Torah approach, see articles by Dr. Yitzchak Levine and Jonathan Rosenblum that appeared in the Jewish Observer and Mishpacha, respectively.

Fortunately, life insurance is not nearly as expensive as you may have imagined. Here in the SephardiHousehold, we pay around $550 a year for combined policies of over $1,000,000. In the case of the death of my husband (chas v'shalom), the money provided would pay off our mortgage, continue to provide a cash flow stream to cover our expenses, and pay for the college education of our children.

In the case of my own death (chas v'shalom), the money provided would pay for all additional expenses that would need to be incurred should we loose my (most valuable) services. Although I believe that my services are worth much more than they would cost on the free market, the point remains, nevertheless, that the services of a homemaker have value and would need to be replaced at some level. Child care, cooking, cleaning, running errands, shopping, etc. have value. So do the administrative and financial services provided by many "modern" homemakers.

In regards to the cash flow stream, one should know that your agent can and will include expenses well beyond "the basics" and ensure that it covers Yeshiva or Day School tuition also. It is a wonder that the admission applications for Yeshivot and Day Schools do not REQUIRE the parents to prove that they are carrying sufficient life insurance to cover these costs in the case of a tragedy, chas v'shalom.

The cost of life insurance is certainly a difficult cost to manage if you are paycheck to paycheck. But, this cost is so important that one should find a way to include it in the budget. Having life insurance gives parents choices that they might not otherwise have in the case of a tragedy, choices that could be necessary not just for the financial health, but for the mental health of the surviving family. Choices that allow parents to ease into a new life without completely upsetting an already upset home and family.

Dr. Levine suggests that buying couples their first year of life insurance as a wedding gift. I definitely think that it should be a priority of the community and of parents to make sure that all married couples (especially their own children) are educated about the basics and the importance of life insurance.

While I might not have the courage to offer life insurance as a gift to the next chatan and kallah, I admire those who do. Maybe, at the very least, I can muster up the courage to mention the importance of life insurance to young couples I know that are having their first child (or second, or third. . . ). I certainly would not have minded if someone had broached the subject, because until recently, we were not carrying nearly enough life insurance.


queeniesmom said...

Disablity insurance is also a must for both parents. None of us could make it on what SSI pays for disablity, let alone pay tuition.

Things happen that one never plans for (man plans, G-d laughs). We've been greatful a few times for this insurance. B"H all is well now and we just happily pay the premiums, but you never know.

Orthonomics said...

I can't argue with you here. We need to add disability to our portfolio at some time too (the sooner the better). Could you give us an idea of the premiums?

Anonymous said...

As one gets older (and one's kids are taken care of) one should also consider Long Term Care Insurance. Once the kids are out of college, if you have enough savings, it may even be worth it to let a life insurance policy lapse (term that is, not whole life) and replace it with LTC. (That will depend on one's individual circumstances, of course)

Just another factor to throw into the mix, but thanks for highlighting a very important issue. We joke that I'm worth more dead than I am alive.

Charlie Hall said...

I'm beginning to think that this blog should be required reading for all Jews. Keep up the good work!

Orthonomics said...

Smiles. Thanks Charlie. I'm definitely flattered.

queeniesmom said...

Like everything else it depends on how much you buy in coverage and what the lag time is (how long before coverage kicks in). Also you can't buy coverage for more than you earn or are valued at (what you contribute to the household in nonmonitary terms but would cost the household X dollars to replicate these services). That being said we probably pay around $200/month for our 2 policies.

Hope this helps. Talk to whoever does your life insurance for real numbers.

Anonymous said...

Queeniesmom said:

Also you can't buy coverage for more than you earn or are valued at

I don't agree with that in the slightest bit. An insurance company would be happy to sell you as much insurance as you'd like.

Now, if you are referring to disability insurance then that is an accurate statement.

Orthonomics said...

Queensiemom is referring to disability insurance.

When it comes to life insurance, they will sell you what you want, so long as you can pay.

Anonymous said...

Got it. I missed that she was the first poster about the topic.

Anonymous said...

Importnat post. I think it is also important to point out that Disability insurance for a working spouse is often just as important as life insurance. In the case, chas vashalom, that a working spouse becomes disabled, there will be no income with the same amount of expense.

Orthonomics said...

David Linn-Welcome and excellent post. Hope to see you back.

Anonymous said...
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Lion of Zion said...

there is no "life insurance" tag on this post and i could only get back to it with a google search