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Life Insurance.
American Middle Class

Why 2020 Is the Year for Middle-class Americans to Get Life Insurance.

The estimated reading time for this post is 366 seconds

  • Life insurance is an integral part of holistic financial planning, but most middle-income American households either have no life insurance or are vastly underinsured.

  • Whether you’re the sole provider for your family or you and your spouse share household expenses, it’s vital to ensure that if something happens to you, the surviving spouse and family members will have money for bills and expenses.

  • Depending on state laws, your heirs may need to pay an estate tax upon receiving an inheritance.  Life insurance benefits may be used to partially or completely offset this cost.

  • There are immeasurable reasons to ensure you have the foundational piece to a peaceful financial future.

  • Visit the Financial Middle-Class homepage for more stories

According to a Northwestern Mutual  2017 Planning and Progress Study, 70% of Americans identify themselves as middle class.  Middle-income households range from $50,000 to $150,000.  Life insurance is an integral part of holistic financial planning, but most middle-income American households either have no life insurance or are vastly underinsured.  Why so many Americans ignore such a significant part of their financial planning?  Numerous experts cited include; (1) they can’t afford life insurance (58%), (2) having to work with an agent (43%), and (3) they don’t understand the options or benefits (35%).

Nearly all financial planning professionals, me included, would agree that life insurance is a foundational component to anyone’s overall financial fitness.  A great financial plan instills confidence and minimizes worries for individuals and families. Which begs to ask, how confident are you that your family and loved ones would be able to maintain their current lifestyle, live comfortably, and pay-off remaining debts if one of the income earners were to die?

A recent Forbes report stated that4 of 5 or 78% of American families live paycheck to paycheck.  They cannot put anything away for a rainy day because all income goes to expenses and obligations.  Furthermore, it’s not just poor or middle-class that’s living paycheck to paycheck.  25% of American families making $150,000 or more a year live paycheck to paycheck, a Nielsen study shows.

The middle-class is economically fragile and very susceptible to many financial unknowns. Life insurance is a great tool that can bring peace of mind to our family and love ones. In the words of Martin Luther, “You cannot keep birds from flying over your head, but you can keep them from pooping in your hair.” Here are five reasons why 2020 is the year to make life insurance a foundational component of your financial plans.

Income Protection and Death Pay-off

Let’s face it, everything you do—from sitting in rush hour traffic to working long hours and pushing toward your next promotion—is for your family.

Have you ever thought about what would happen to your family if you were no longer around to provide and do all that you do for them?  Whether you’re the sole provider for your family or you and your spouse share household expenses, it’s vital to ensure that if something happens to you, the surviving spouse and family members will have money for bills and expenses. The answer could be as easy as term Life insurance. It’s an affordable, fast, tax-free income replacement option for your family if you die. The simple guideline is that you obtain 5-10 times of your gross annual salary in coverage for income replacement life insurance

This may sound crazy, but when you die, your debts do not die with you. Most of these debts will come due at the time of your death. Your maximum medical benefits can be reached quickly in the case of a terminal illness or extensive surgery. Creditors, particularly medical service collectors, will not show much mercy in collecting on your debts—yet another reason to protect your family with life insurance.

Inheritance

According to CNBC, 60% of parents don’t plan to leave an inheritance. In the spirit of fairness, I can understand the logic of not leaving an inheritance. However, millennials are suffocating, to the tune of one and half-trillion-dollar in student loan debt. Research by Apartment found that it will take most millennials about twice as long to buy a home as they expect. Moreover, 66% of millennials aren’t actively saving for retirement, according to Forbes magazine.

The good news is that inheritance doesn’t have to be large or expensive. Life insurance enables you to do the most good for less. “A good man leaves an inheritance to his children’s children… Proverb 4:5. Even if you don’t have children, you can still leave an inherence. Think for a moment of all the goods you can do for your children, siblings, relatives, or (ME). But importantly, the proceeds of the policy are tax-free.

Paying Federal or State Estate Taxes

I imagine plenty of people have tried to evade death and taxes. Thus far, I have yet to meet anyone successful at avoiding either one.  Eventually, they’re caught up. Given that you can’t evade it, you might as well plan for it. “In this world, nothing can be said to be certain,

Depending on state laws, your heirs may need to pay an estate tax upon receiving an inheritance.  Life insurance benefits may be used to partially or completely offset this cost. It’s always a good idea to consult with your insurance provider or a financial professional to understand how estate taxes may affect your beneficiaries.

Charitable Contributions

Okay, if you’ve watched the news or followed social media, you might have heard that Bill Gates and Warren Buffet plan to give away nearly all of their money, to the tunes of $200 billion. These two gentlemen are leading the way in a campaign called “The Giving Plead,” which encourages extremely wealthy people and billionaires to contribute much of their wealth to philanthropic causes.

Alright, you think these guys are billionaires, they can afford to give away billions of dollars and still have money to last them a lifetime. Mother Teresa once said, “if you can’t feed a hundred people, then feed just one.” The good news, my friend, you don’t need billions of dollars. You can have similar and lasting positive impacts, even long after you’ve transitioned into the next life.

Life insurance is a simple and (often) inexpensive way to help your favorite causes and organizations that are closed to your heart. I am reminded of a quote by Charles Dickens, “No one is useless in this world who lightens the burdens of another.”

Paying Final Costs

Alright, even with all the advances in modern technology, no one has figured out a way to completely evade getting sick or dying (if you know something, do share). Inevitably, our bodies are prone to sickness and unable to escape death. Life insurance offers a simple and affordable means of paying for funeral or cremation costs, medical bills not covered by health insurance, estate settlement costs, and other unpaid obligations.

There is no excuse for anyone to be underinsured, or even worse, uninsured when it comes to life insurance. There are immeasurable reasons to ensure you have the foundational piece to a peaceful financial future.  Your loved ones and community can’t afford to live without your contributions in their lives, albeit financial. This moment right now is the ideal moment to act and show some love to them.

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Author

Ceranes Lejulus is the Founder and CEO of FinanceWell™, a personal finance company that empowers people to maximize their money and master life's financial journey.

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