5 Unexpected Ways Life Insurance Can Help Your Family After You Die
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Dying isn’t cheap.
Which is unfortunate because you can’t even attend your own funeral.
On top of funeral and burial, which will likely be pricy, you also have to consider other expenses you leave behind: your mortgage, your debt, your unpaid medical bills, your lost wages…
What happens to all of that? Your family has to grieve and worry about money?
That’s when life insurance can help. After your death, it can help your family stay financially afloat.
5 Ways You Didn’t Realize Your Loved Ones Can Use Your Life Insurance
Like other forms of insurance, you pay a monthly, semi-annual or annual premium in exchange for life insurance coverage. If you die, the designated beneficiaries receive a sum of money, called a death benefit. This money is typically tax-free.
This death benefit can be used to cover the cost of your funeral and burial. Most of us realize that. But most of us don’t realize the life insurance payout can cover just about anything.
“Unfortunately, the subject of life insurance is never taught in school, and many people share the same belief that it only covers funeral and burial expenses,” Mark Charnet, founder and CEO of American Prosperity Group, says in an email.
The truth is, unless there’s a trust, the beneficiary can use that death benefit as they see fit. To get an idea of exactly how life insurance can help your loved ones, here are a few examples of some more unexpected uses of that death benefit.
1. If You Haven’t Paid off Your House
The average American who purchased their home in 2017 with a 30-year mortgage faces a median monthly payment of $1,620, according to the Joint Center for Housing Studies at Harvard University.
If your spouse or partner is left with that monthly expense — without your income — it might be difficult to foot the bill.
A life insurance payout could help cushion the blow — or pay off the home entirely.
2. If You Co-Signed Loans or Credit Cards
Unfortunately, debt doesn’t typically die with you. Creditors still expect payment.
Depending on the terms, if you’ve co-signed a loan or credit card with your loved one, creditors will come after your loved one once you’re gone because they’re now 100% responsible.
That goes for student loans, mortgages, personal loans and credit cards.
The payout from your life insurance can go toward wiping these debts clean.
3. If You Racked up Unexpected Medical Bills
The average hospital stay in the U.S. costs about $2,271 per day, according to the latest data from the Kaiser Family Foundation.
So it’s no surprise medical debt is a serious issue in the U.S. Although grim to think about (sorry!), you might require medical attention before you die.
The data shows that bills can accumulate quickly — even if you’re covered by health insurance. Life insurance is just another way to help your family cope financially.
4. If You Help Foot the Utility and Grocery Bills Each Month
If you die, your spouse will likely experience a loss of income. For some, that could be half — or all — of the household income.
The reality is paying the electric bill and stocking up on groceries might become difficult.
A life insurance payout can help cover these everyday expenses — whatever the beneficiary needs to get by.
5. If You Pay Your Kid’s Daycare Bills or College Tuition
Maybe you’ve got a kid in daycare. Or one in college. That stuff’s expensive.
If you have a child under age 6, this statistic might not surprise you: In 2017, the average American parent forked over $433 a month on child care.
Once your kid gets to college, you face wild tuition rates. The average tuition paid during the 2016 to 2017 school year was $23,757, according to a Sallie Mae report.
Life insurance can help cover those costs for your kids.
How to Determine Whether Life Insurance Is Right for You
If you’re worried about leaving these expenses behind for loved ones to handle, purchasing life insurance could be a sound financial decision.
The best part is signing up for life insurance is easier than ever.
Ethos, for example, can get you term life insurance in less than 10 minutes — with no medical exam — for coverage up to $1 million. Ethos offers a digital application, and customer service is available if you have questions.
It partners with a major life insurance carrier to quickly offer policies as low as $6 a month.
If you’re still not sure and want to read more on life insurance, Penny Hoarder Tyler Omoth outlined life’s major stages and answered the question: Do I need life insurance?
Carson Kohler ([email protected]) is a staff writer at The Penny Hoarder. She’s ready to write about something a little more cheerful now, like kittens.