Survivor Life
Out of Time, Out of Luck? How Prepared Are Your Clients for Their Own Departure?
by Ashley E. Augello

Time is up. What did your clients leave behind: A fabulous legacy, debt-free financial stability, pre-paid funeral arrangements, or adequate college funding for their children? If only life were that ideal. In reality, many people feel their life insurance coverage will not allow their family to maintain their standard of living once they are gone.

Survivors are left with various forms of debt when the prime breadwinner passes on. Estate taxes, probate costs, funeral costs, uninsured medical costs, debt repayment, state and federal death taxes, college funds, basic living expenses, and more. All of these expenses are left for the surviving family to cover.
The average cost for a funeral is $6,500., according to the National Funeral Directors Association. But that doesn’t include such things as the cemetery plot, the grave marker, and assorted miscellaneous expenses, such as flowers, which can easily put the total cost well over $10,000. According to the College Board, the average total bill for a year at a public college was $15,566 for the 2005 to 2006 academic year. A year at a private institution was more than twice as much at $31,916. Those numbers are projected to increase 6% in the upcoming year. The average estate tax for 2006 was 46%, according to Faireconomy.org. Nearly half of your client’s estate will be paid to the government, leaving little for their families to fall back on. As an advisor, have you helped your clients prepare for these hits?

Detailing the alarming amount of expenses that a family will be left with when the wage earner is gone will help raise awareness with your client of the importance of life insurance. Without it, clients could be setting their families up for failure with not being able to attend college, working extra jobs to pay off debts, and spending what savings they had to keep up with everyday living expenses. Nobody wants to leave their loved ones in the hole like this. Survivor life insurance is imperative to the success of your family’s financial future.
A whole life insurance policy provides people with death protection up to age 100. The premiums remain at a fixed rate for the entire policy’s duration. Premiums in the beginning of a whole life policy can be several times higher than one would pay initially for the same amount of term insurance, but they are considerably smaller than the premiums that people would eventually pay if they were to keep renewing a term life insurance policy into their elder years. The gain is worth the cost. In addition, although one pays higher initial premiums for a whole life policy, whole life insurance accumulates cash value.
Whole life insurance, undoubtedly, has its perks. The most important benefit is lifelong insurance protection. As long as your clients pay all their premiums as scheduled, their fixed level premium cannot be increased and their policy cannot be negated for any reason at any time. Think of it this way: if your client takes out a policy in picture perfect health at 25, the client will pay that minimal premium even as their health begins to falter in your less vibrant years and that is a beautiful thing.

Many people who take out policies in their early 20s cannot accurately predict how large their families will become. Often, they will start out with a small policy and add to it as the need arises. The beauty of the whole life policy is that it is based solely on one’s health at the time that the insurance policy is initiated. Provisions or riders can be added to allow the client to purchase additional coverage without having to take a medical exam or provide documentation of insurability. If a client’s health falters, these policies can maintain financial security.

As with anything in life, there is a downside to whole life insurance as well. Though the benefits far outweigh the costs, it is important for consumers to understand both sides of a product before buying. One downside is that the required premium levels that your client pays early on may not be easily affordable. The initial premiums are generally higher than those of term life insurance policies. This struggle will eventually balance itself out and actually make your clients money in the end, but it is an important aspect for them to consider when purchasing a policy. Not being able to easily afford the required early premium levels can make it hard to buy enough protection and the coverage can cost be significantly more during the early years of coverage when the client’s need for protection is often the greatest.

Survivor life insurance, or second-to-die insurance, is a variable of the whole life policy. Survivor life insurance is a whole life insurance policy that that covers two lives, typically a husband and wife, and provides for the payment of the proceeds when both insureds have die. The survivor policy premium is often much less than if individual coverage is purchased on each life. Survivor life insurance is generally designed to pay estate taxes, replace income for dependants, pay final expenses, pay federal and state death taxes, and create an inheritance for your heirs.

No one wants to leave their children in debt without any resources once they are gone. This can make survivor life insurance is an important part of a family’s financial future. Though costly, the knowledge that their family will be in good hands once they are gone is priceless to clients looking to provide financial security for their loved ones.
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Ashley Augello is an assistant public relations executive at The American College in Bryn Mawr, PA. Originally, from Wall Township, NJ, Ashley graduated from Villanova University in May 2007 with a Bachelor of Arts degree in Communications. She is pursuing her career in Public Relations and has relocated to Staten Island, NY. Ashley can be reached at Ashley.Augello@Villanova.edu.