I just recently found out that the month of September is Life Insurance Awareness Month. Although, this is not something medical students are dying to know about. It is something everyone should be aware of. Life insurance can do some pretty amazing things for people. It can pay off debts and loans, providing surviving family members with the chance to move on with a clean slate. It can keep families in their homes and pre-fund a child’s college education. It can provide a stream of income for a family to live on for a period of time. Life insurance can do all of these wonderful things for your family…there’s just one small catch. You need to own life insurance.
One of the topics at our Future Impact Program for our fourth year medical students is the topic of protections. The two main topics of conversation at this event is disability insurance and life insurance? What if you were suddenly gone and your family had to manage on their own? We ask the married medical students when was the last time they did the math to make sure their loved ones would be ok financially?
There’s a growing crisis of too many Americans not having adequate life insurance protection. According to the industry research group LIMRA, 30 percent of US households have no life insurance whatsoever. Here’s the bottom line: A majority of families either have no life insurance or not enough, leaving them one accident or terminal illness away from a financial catastrophe for their loved ones.
To make sure our medical students are reminded of the need to include life insurance in their financial plans, we’ve include the topic of protections in our financial literacy topics. We do not plan for accidents, but we can plan to be prepared and have security.
So how much life insurance does an individual need? Well, this is really not the question, but the question is how much investment capital does your family need at the time of your death to maintain their current lifestyle. For one, how much will be needed at death to meet immediate obligations. And, how much future income is needed to sustain the household.
The first category is fairly easy to ascertain. It is the sum of final expenses (including uncovered medical costs, funeral expenses and final estate-settlement costs) and other lump-sum obligations (such as outstanding debts, mortgage balance, and college costs). The good thing, federal loans are forgiven in the event of death, so this will not be something you need to factor in. The second variable is a bit trickier. It involves calculating the “present value” of future needed cash-flow streams. By answering a few simple questions, you can get a rough sense of the needs for capital that might exist at your death.
To help you assess your life insurance needs, here are apps that can walk you through that assessment.
The views expressed in this content represent the perspective and opinions of the author and may or may not represent the position of Indiana University School of Medicine.
Jose Rivera Espada is the director of financial aid at IU School of Medicine, a nine-campus allopathic medical school in Indiana. Jose’s experience includes working as an assistant director of financial aid at Butler University and a financial aid coun...