Many of the historically guaranteed conventions of financial planning, are under constant change, making it more difficult than ever before, to achieve a healthy retirement and leave a legacy of financial preparedness and well being to our families. It’s not as easy as it used to be, to afford to save money, pay bills, fund post-secondary education for children or purchase a home. These are all benchmarks that most adults in the United States will transition through, whether we are financially prepared, or not.
One of the most common questions that consumers ask about life insurance, is whether or not they need it. There are many reasons to question an additional annual or monthly expenditure, and as a rule, most households try to reduce the amount of monthly financial obligations they have. But with personal debt loads and household debt ratios higher than they have been (possibly ever, historically), it is time to consider that life insurance can also provide debt relief, when one or more wage earner is lost.
Personal Debt Makes Life Insurance Coverage Critical
America has come through two recent economic recessionary periods, that created job loss, increased cost of living and other factors that have contributed to the highest personal debt load (per person over the age of 18 years) than we have ever seen before historically, as a country. While we look at other countries in financial crisis, like Greece, the truth is that the average American household may be more in debt, and on the verge of insolvency than families in other parts of the world.
A recent study in Trading Economics, revealed the debt equation for American households:
- The average family owes $204,992 in mortgages.
- U.S. households carry an average credit card balance of $15,706 (at an average rate of 15% compounded interest).
- The average American family spends 4.2% of median income on servicing loan and credit card interest payments.
- American’s now owe over $1.2 trillion dollars in student loans (a new survey reveals Associates Degree holders can take 21 years to pay off their student debt).
- Most Americans (62% in 2015) reported less than $1,000 in cash savings.
When you combine the high debt load that the average American carries, with the economic adversity in many regions across the country (unemployment and under employment, including lack of full-time jobs and stagnant wages), real conclusions can be drawn about personal financial well being. While some consumers believe that life insurance is an ‘extra’ or a luxury commodity reserved for high income earners only, the truth is that it is a necessity for all Americans. As a nation, we are living close the the edge of insolvency and real financial hardship, or as many experts agree, “one paycheck away from serious economic adversity”.
If a household is struggling under debt load, with combined car payments, a mortgage, health insurance and other expenses, progress can be difficult to make. Servicing the debt on a monthly basis may take virtually all the financial resources available. But while Americans can (and should) be looking for ways to chip away at personal debt, and increase liquid savings, a life insurance policy that covers (at minimal) the mortgage, credit cards, loans and other debts should be arranged, to ensure that the surviving spouse and children are provided for. A good life insurance policy and literally wipe out debt, and allow your family to stay within the family home, and provide for the future.
Talking about debt and financial planning, can be a sensitive issue. But for most Americans, the value proposition makes sense. While they continue to work on improving personal finances, they can have an affordable term life insurance policy in place for each parent, and explore investment in Universal life policies with annuities, that children can draw an income from, later in life. With so many insurance products and flexible premiums to choose from, no one should be left behind, when it comes to taking advantage of the financial tax shelter and peace of mind.