One of my favorite childhood memories is the annual family trip to a major theme park in South Texas. A specific memory I recall is the year my father convinced me to take a ride on the Runaway Mine Train, a smaller, seemingly innocent roller coaster. I strapped myself in thinking that I had carefully calculated the risk of riding. As we were nearing the end of the ride, the coaster tracks traveled through a house which captivated my attention. At the moment when I least expected it, we took a huge dip! Looking back, for the thrill of it, I am glad my dad strongly encouraged (or maybe even bribed!) me to hop aboard. Knowing myself, though, had I been made aware of the big dip, I would have braced myself for what I knew was coming or perhaps would have skipped the ride altogether.
At Woodward Financial Advisors, we strive to make sure our clients are equipped with the proper protection in order to minimize the impact of a “surprise dip”. Life insurance is one tool which we often see not being used in the most appropriate manner, especially for women. If you’re a married woman, mimicking the insurance coverage your husband has may not be the best strategy. If you’re single, you may have skipped over it altogether thinking you don’t need any coverage. As you’ll see, there is no “one size fits all” solution for women.
In Part 1 of our series of blogs to the Wise Woman, I mentioned that women quite often leave the workforce to care for loved ones. It may seem that a woman who is out of the workforce earning no income would not need life insurance. After all, if she has no wages, no one is left depending on a cash contribution if she were to pass away prematurely. However, we should think about what sort of material contributions would be drastically missing if she was no longer around? For a woman who home schools her three children, it might create a financial hardship if her material contributions were absent. Making an assumption that she also handles half of the family affairs such as meal preparation, household maintenance and cleaning, as well as taking the children to their extracurricular activities, how much would it stress the family finances to completely absorb all of those additional burdens without extra income? Salary.com has a pretty neat Mom Calculatorthat will actually devise a customized annual salary, which might provide some insight as to how to put these intangibles into dollars and cents.
On the other hand, we have many female clients who earn more than their partners. If a woman is the primary breadwinner in a home with children, she will likely need more life insurance than her spouse. Rather than selecting a policy that mimics her husband’s, it is important to carefully consider her income level as well as how long her family needs her to provide that income.
A third scenario may apply to readers who are single. It may seem like a single woman with no children doesn’t need life insurance. While this may be true, there are some individuals where life insurance should be considered. For example, if a single woman is supporting her parents, or foresees an instance where she may need to support them (or other family member), locking in a death benefit to help cover those future income streams may be a good idea. Furthermore, as a single individual, it is important to ensure that any debt and obligations like a mortgage and education loans would be covered with assets or insurance proceeds in the event you were to die unexpectedly. In each instance, the answer to the question of, “How much life insurance do I need?” is unique to the situation and must be considered carefully.
Having a secure financial plan involves making sure that you avoid making omissions that may leave you or your family exposed to a risk you can’t afford to take. While I haven’t been on a roller coaster in a while, I have seen the implications of individuals who were financially exposed to risks they were and weren’t prepared for. I will share more about that in my next post with a personal story. If you feel you may have risks that you haven’t considered in your financial plan, consider contacting Woodward Financial Advisors as we have helped hundreds of women and families make certain they’re financially prepared for the dips in life.