“To serve and protect” is a common law enforcement motto. It speaks of the function and duty of law enforcement to serve citizens by protecting them.
Those of us who have families or other people who depend on us financially serve them by providing for their financial needs.
How can we serve our dependents and provide long-term protection, even after we die? Two ways: a will and life insurance.
A will documents what you want to pass on to others when you die, preserving your control over who gets what you leave behind.
Perhaps the most important thing you can do with a will is to leave specific instructions regarding the guardianship and care of minor children. If you don’t do anything else, make a point of putting in place your instructions and desires concerning the care and guardianship of your children in the event of your death. This applies to both parents. Everyone is going to die, but when is the great unknown. You can only make sure you are ready. If you don’t leave legal instructions about who should raise and care for your children, someone else will make the required decisions and the decisions may be completely different than your desires.
A will also allows you to say what should happen to all your “stuff” when you die. Again, if you don’t leave legal instructions, someone else will decide. There is not enough room here to cover all the aspects of wills. If you do not want a judge, or some other representative of the state, to say who gets your “stuff” when you die put a will in place. Public libraries have books on writing basic wills. An attorney who specializes in wills is a better alternative, especially if you have a lot of details to address.
Insurance protects against, and offsets, risks. Examples of risks to protect against are illness, car accident, damage to a home and death. Types of insurance include homeowners, auto, life, liability, health and disability. Life insurance is what is important in terms of providing for your dependents.
How much life insurance should you have? Everyone’s situation is different. The usual recommendation is 5 or 10 times your annual salary. That may be a good place to start. However, a more thorough way to decide how much life insurance you should have requires that you invest some time determining actual needs you would like to provide for and figuring out how much money is required to to meet those needs if you were no longer around. Consider needs such as income replacement, mortgage payments, utilities and food, car payments, child care and higher education for children. Determine how much money will be needed annually and multiply by the number of years for which you feel it would be necessary to provide money to your survivors.
Term life insurance is the cheapest and quickest life insurance to put in place – a few hundred dollars a year. Even if money is tight, if you have dependents make every effort to put in place at least a minimal amount of life insurance. This will help your survivors through the transition time necessary to replace lost income and make other financial adjustments.
Disability insurance (short-term and long-term) is one other element of protection to strongly consider. It is likely you know at least one person on disability or who has someone in their family on disability. Disability insurance provides some level of income when you are not able to work at your job or in your chosen profession for an extended period of time. Consider: statistically, at most ages, the probability of disability is more likely than death at that age! Some studies show that as many as 3 out of every 10 workers between ages 25 and 65 will experience an accident or illness that keeps them out of work for three months or longer. Without some income replacement you may face unmanageable debt, inability to save for retirement or even personal bankruptcy.
If you have financial dependents that you desire to serve and protect I encourage you to make sure you have a will and the appropriate insurance in place.