My first experience with life insurance occurred in the early 1990s, when I was young financial planner who knew everything about anything (so I thought).
Here’s a true story, some background first.
My client, a doctor, operated a successful plastic surgery practice in Toronto. He was in his early 40s, had three young kids, a stay at home wife and a mountain of debt. Most of the debt came from medical school and equipment needed for his practice. But a good portion of the debt came from a lifestyle that reflected the income he expected to eventually earn.
Now here’s what happened.
One morning, I received a call from a crying woman who introduced herself as Frank’s wife (not his real name), Judy (not her real name) explained how Frank suffered a fatal heart attack while playing golf with his buddies. She asked for an appointment to discuss Frank’s life insurance policy.
During our meeting, I explained that Frank had a $1,000,000 life insurance policy and she was the sole beneficiary. We discussed how the death benefit could provide time to rebuild her life, but she would need to make several major financial changes.
After running many different “what if” scenarios, Judy decided to downsize her family home, transfer the kids to public school and found a part time job. The life insurance death benefit, as well as the proceeds from the sale of the first house, allowed her to buy a smaller home. She was now mortgage free and she invested the remainder in an annuity that provided a guaranteed monthly payment for life, thus supplementing her income.
Was this a perfect outcome, NO, but it provided the family enough money to get back on their feet. In hindsight, Frank needed more insurance coverage.
Frank’s Widow faced her own mortality
After completing the work on Frank’s estate, Judy asked if she needed her own life insurance policy. My answer was a resounding “YES”.
Why did Judy need life insurance?
Judy had three financially dependent kids (ages 10, 12 and 15 ). If she died unexpectantly, the estate would not have enough money to financially support her kids until they were old enough to be independent.
Again, we ran numerous illustrations and finally estimated that if Judy died today, her kids needed approximately $1,200,000 of cash to cover their care and education expenses until they reached the age of 21.
Although Judy’s cash flow was tight, she realized that if she died during the next 11 years, the kids would not have the necessary funds to maintain a reasonable lifestyle. Judy decided she couldn’t live with the risk, so she bought a term life insurance policy for $1,200,000.
Fortunately, Judy is still alive today and doing very well.
Lessons for widows and widowers
1. Financially dependent kids may create a need for life insurance.
Ask yourself, if I died today would anyone (i.e., kids, parents, business) be financially burdened by my death? If the answer is yes, you may need life insurance.
2. Although rare, young people can die too.
When a young person dies, he/she often causes disastrous financial implications for the surviving spouse and children (not to mention the emotional suffering).
Don’t assume that the unexpected will not happen to your family. Consider all risks, and purchase the appropriate insurance.
3. Incorporate life insurance in your financial plan
When preparing your financial plan, include a life insurance analysis and discuss the family’s strategy in the event of your unexpected death.
If you’re widowed and not sure if you need life insurance, or how much life insurance is sufficient, please book an appointment and I will personally help you evaluate your life insurance needs.
The process of finding a financial advisor can be overwhelming. It is our job to make that process simpler and easier.
Dri Financial Group’s proprietary Wealth Navigator Process is designed with you in mind.
Its structured framework helps you make an informed decision and feel confident in our team and management practices before we get started.
We offer you a range of services from creating bespoke financial plans and providing investment advice to helping you take advantage of our investment models. If you would like more information on the Wealth Navigator Process or our team, call me any time at 416.355.6370 or email me at richard.dri@scotiawealth.com.
—
Beyond helping you manage your finances, we take pride in motivating, educating and helping you expand your financial literacy. We are here to answer any questions you have and to help you feel in control of your financial destiny.
If you are ready to dive deeper into your financial literacy journey, we have a wide range of free tools and educational resources available.
-
- Subscribe to our Never Retire Newsletter
- Contact us to order a complimentary e-book
- Check-out our latest Wealth Navigator Podcast
- Follow me on LinkedIn
source https://richarddri.ca/as-a-widower-do-i-need-life-insurance/
Dri Financial Group 