Let me take you on a journey, one that is dark, scary and filled with uncertainty. Too scared? Don’t be. Remember, I’ll be right beside you. After all, that’s my job as a financial advisor: to sometimes show you the dark side of sticky financial situations and how you can avoid them.
The path we’re headed on is a cautionary financial tale about a man who literally placed his life in his employer’s hands.
Let’s call him Bob. He’s always been the primary breadwinner for his family and earned a good, steady income. Bob also had great benefits, including health and life insurance.
Then out of the blue, Bob becomes a victim of downsizing. Gone are his biweekly paychecks and all those nice benefits. It’s a blow that knocks his family sideways financially.
But unfortunately, my story gets worse.
In the middle of trying to land a new job, Bob gets sick and dies. Left behind? His emotionally and financially shattered family who will now struggle for years to come. Why? Because Bob counted on his job and its group life insurance coverage to take care of his family.
Like the rest of us, Bob didn’t have a crystal ball to forecast his future, or things might have turned out differently for those he left behind.
Fortunately, you don’t need a crystal ball. You simply need a better plan to protect your family should the unexpected occur to you. Remember, unlike Bob, you don’t have to put all your eggs in one basket when it comes to protecting your family’s financial future.
A very real issue
The good news here is that I made that story up. The bad news is these types of experiences occur all the time. You might actually even know someone who experienced something similar.
Made-up or real though, the lesson of this tale is obvious: if the bulk of your life insurance comes from your employer, your family might not be as well-protected as you think. Lose your job and you could lose your coverage as well. This is one of the big reasons you don’t want to tie all of your life insurance to your employer.
Here’s another. Let’s assume you’re still at a point where you need life insurance to take care of your family if you pass away. But what if you receive a medical diagnosis that’s not terminal but makes you uninsurable nonetheless? This happened to my wife, so trust me, this can happen. In a situation like this, if all of your life insurance is tied to your employer, you could find yourself stuck with that employer even if you don’t want to be, just to keep the benefits.
So how do you ensure nothing like this ever happens? Simple – purchase at least some level of life insurance on your own while you’re insurable so that all your coverage is not tied to your employment.
How much do you need?
If you’re not sure just how much coverage to get, spend a few minutes with ourlife insurance calculator on usaa.com. The calculator walks you through a scenario to show you what your family would need to live on in the event of your death. Among other things, it includes debts to be paid off, goals to be achieved by your survivors and survivor income needs. It also allows you to plug in existing assets that can be used to lower your need for insurance. The ultimate goal of the tool is to help you determine the right amount of life insurance to buy.
Let’s face it, we’re all going to leave this world someday and most of us don’t know when that will be. If it happens before you’ve accumulated enough assets to take care of your family, life insurance could be the difference between your family struggling to make ends meet or being financially comfortable as they try to move on. It really is a big deal. So don’t put all of your life insurance eggs in your employer’s basket. Get some of your own as well.
Hopefully you’ll never lose your job and even better, hopefully you’ll never need life insurance coverage. If either happens though, separating the two is a safer strategy for your family.
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