Blog

Adulting 101 and Life Insurance

The importance of life insurance.

The importance of life insurance.

Insurance for me is an obvious choice. 

I buy a phone, I get insurance.  I'd rather pay a small fee to replace the phone I dropped at just the right angle to crack my screen.

I'm in California and insurance is one of those things you legally need to have in order to be able to drive. In 2017 alone, my little Camry got dinged by a distracted driver on the freeway, a hurried construction worker blocking my little one way street, and a too important to be bothered luxury vehicle that was trying to win a parking war with my parked car on a busy street. Insurance was my friend for all 3. 

I buy insurance for all of my jewelry.  I bought myself a cute little diamond ring in silver that nearly matches the earrings I bought myself for Christmas.  I had it sized and clapped my hands with joy when I saw it sparkling on my pinky finger (because my pinky ring is bigger than his, whoever he may be).  Not even two weeks later and a little diamond was missing.  I took it right back to Zales, and it's being repaired for free.  Insurance rocks.  

I've had a life insurance policy since I was 16.  This isn't one of those that pays out big if I die.  This is one of those that takes care of my final costs.  My mom was selling insurance for a mortuary when she bought cemetary plots and made sure I (along with my sisters) had something in place to cover being picked up and taken to the mortuary.  My casket is picked out (although I don't think I'd ever choose the rose colored one she did), They will embalm me.  They will do all they need to do in order to lay me to rest, and all anyone has to do is call the mortuary and tell them where to get me.  

This is huge.  When my ex's uncle passed, he had friends manage his belongings, but two weeks later, no one had any clue what had happened to his remains.  I made calls and got that handled, but there was the cost included with that.  I'll forever be grateful to the Cremation Society of Los Angeles for making things easier.  It was still a bit crazy with trying to get signatures from two of his next of kin.  It wasn't me.  

When my twins passed, I was lucky enough to be put in touch with Natural Grace.  Forms were completed and my babies were picked up, cremated, and returned to me in an envelope.  They made an impossible situation something that I was able to take control of.  I was able to mourn in my own time and space and I later released their ashes at one of my favorite beaches.  

I just bought my own life insurance policy.  It's a term policy and it's in addition to the term policy offered by my job.  Ideally, term isn't ideal.  It's something that will work for my situation because there isn't a cash value tied to it that would affect my children's benefits from the state.  If I had the ability to, I would set up a Special Needs Trust and put an Indexed Universal Life Insurance Plan in it.  That's a bigger discussion that I can rabbit trail into another day.  The truth about being a special needs mom is that I do need support and the benefits my kids get rely on the fact that I'm at or below the poverty line.  I have to be careful and term insurance fits our needs for now.  I can convert it later.  

Why would I need more insurance? My policy at work wouldn't cover two years salary and the point of insurance is to replace what was lost.  You break a phone, they give you a new one.  You get a dent or scratch your paint, insurance pays for the repair.  Your diamond is lost, insurance replaces it.  

So how much insurance do you need?

There's an acronym.  DIME. Debt, Income, Mortgage, Education. 

Debt

You want to cover your debts.  Once you go, whatever is in your bank typically has to go to your debtors. My kids would have nothing but the kindness of an overburdened relative.  You want to consider credit cards, loans, and any other thing you really needed but didn't have the cash for. 

Income

I mentioned the insurance through my job wouldn't cover two years of my salary.  This is a combination of what they provide for free, and what I voluntarily added.  It's not enough.  Ideally, it would be ten times your annual income. My family would need some time to get on their feet.

Mortgage

You want to cover your mortgage.  Even if I'm still paying rent, I would want my family to be able to cover the cost of living, even without me running behind everyone to turn off all of the lights and electronics. 

Education

The cost of college keeps growing each year, but ideally, insurance would cover the cost of your children's education if you are not around to put in the overtime or co-sign on loans.  This week my 16 year old let me know he wants to start taking college courses to get the core requirements out of the way early.  I'm happy and terrified about the cost involved.  

In Suze Orman’s Women & Money, she suggests being insured for enough money that your family can live off the interest the same way they live while you are alive.

I haven't updated my file this year but I usually do every birthday.  I list achievements and my favorites.  I keep a file updated so my family knows what songs I like.  Which flowers would be appropriate?  Please don't have an altar call.  If I wasn't winning you toward Jesus in life, don't make me guilt people into it in death. What do I want to be buried with (I don't really believe a naked showing would be appropriate, so I try to have one or two favorite outfits in my closet at all times)? Maybe I have a favorite stuffed platypus? I don’t. But what if I did?

About 3 years ago I was going over things with my  Mom and Step Dad. My mom showed me her Revocable Living Trust. I asked why she had one and her answer was both simple and incredulous, like I should know. "So the government doesn't take it all from you." With their planning, I came up with a sheet of questions to support them through those discussions.  I'm sharing it here: 

Property: Which properties do you own. Which names are on the title?  Who holds the mortgage? Who is on the loan? Do you want the property liquidated and divided? What about cars? 

Minor children: Who will be left in need of a guardian? Who would you want to care for them? Would you want them to move or would you want their home and schools to be consistent? Would you want their assets put in a trust they can access as adults? Consider annuities that would pay out monthly instead of a lump sum.

Specific Items: Is there any special/sentimental item you want someone specific to have? What about a bible or jewelry? Photo albums? Designating by photography might help.

Remaining Assets: What happens to dishes and appliances? Are these to be sold for cash? Maybe you want it left in the home for those that are living there with you now. 

Bank and credit accounts: List all of your banks and accounts.  Do you have joint accounts or beneficiaries that will need to be notified? 

Documents that will need to be accessible for you executor: Bank statements, Checkbooks, Health Insurance policies, life insurance policies, income tax returns for the last 2 years, Stocks and Bonds, Agreements and Divorce Papers, Unpaid bills, Deeds, Leases, Birth/Marriage/Death certificates. 

People to Alert of your passing: Employer, Social Security, Utility Companies for all properties, Post office, Credit Bureaus, Credit Card Companies.  

Tough lesson, I know.  I hope it helps someone. 

Edit: I was fortunate enough to have someone find me and share their experience with searching for a policy.  Lauren Thomas writes, "Variables like marriage, divorce and children to one’s life makes navigating insurance policies overwhelming. It’s crucial to re-evaluate policies and make changes whenever major life events occur." She compiled her research and shared it with me after consulting with "insurance experts and financial advisors to create a useful resource to help individuals make sense of what can seem to be a complicated process." Check it out. 

Another resource for 2019 is this list from LendEdu. I love their simplified and informative list which goes over the basic coverage available and the risks and benefits of each.