How (and Why) to Talk about Life Insurance
Life insurance is a pretty dreadful thing to talk about. It forces you to think about your own mortality and what would happen if you had to leave people behind. Not a fun topic for anyone.
But dealing with those dismal thoughts is essential for creating a solid financial framework for yourself and your family. Even though you won't personally benefit from a policy that pays out only in the event of your own demise, life insurance policies give you the peace of mind knowing that any family members you support with your income, including children, a spouse or aging parents, will continue to be supported even if you die.
A survey released this month of more than 2,000 adults from State Farm found that parents would rather talk with their children about almost anything else, including drugs, alcohol, religion and politics, than life insurance. Still, talking with parents is how kids learn about life insurance, with daughters most likely to name their moms and sons most likely to name their dads as a top source, according to the survey. Not surprisingly, parenthood is the life event that's most likely to inspire someone to take out life insurance - but despite that prompt, only about half of parents take out life insurance policies beyond what is provided by their employer, the survey says.
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As a result, many people do not have enough life insurance to replace their income for a period of time or provide for their families in the event of their death. According to a study of more than 2,000 people by the industry groups LIMRA and the LIFE Foundation, 20 percent of people who hold some life insurance say they know it's not enough.
If you're struggling with how to bring up the topic in your own household, State Farm recommends broaching the subject with a discussion of goals, which is a more palatable topic of dinner table conversation. Talking about travel or paying for college can start a discussion about long-term financial planning, says State Farm spokeswoman Anna Bryant. Sharing a family "bucket list," which the State Farm website BucketList.org allows you to do, can also help track your progress and meet your goals.
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Life insurance also doesn't have to be prohibitively expensive. MetLife estimates that the cost of taking out a half-million dollar policy on a healthy 35-year-old can be as little as a dollar a day. The LIMRA and LIFE Foundation survey found that people tend to think life insurance is much more expensive that it actually is. Survey respondents guessed that a $250,000, 20-year term life policy for a healthy 30-year-old would be about $400 a year, but in reality, it's about $150 a year.
Financial experts often recommend that people take out insurance policies worth at least seven times their annual household income, but specific needs vary . Many insurance providers, including State Farm and MetLife, offer interactive life insurance calculators to help you figure out just how much insurance you might need.
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But as Rachel Emma Silverman, author of "The Wall Street Journal Complete Estate Planning Guidebook," told U.S. News, everyone's life insurance needs are different, and she avoids giving guidance on the amount to take out in her book because there are so many variables. "It depends on your current income, the number of children you have, your spouse's income. ... It's an art, rather than a science."
