Why Women Need Life Insurance

Today, women have more financial responsibilities than ever before. How will your family or loved ones manage financially if you die? Whether you are single, married, employed, or a stay-at-home mom, women need life insurance. At the very least, life insurance can help pay for the costs of funeral and burial services, estate administration, outstanding debts, estate taxes, and the uninsured expenses of a final illness.

What type of woman needs life insurance?

Working women

Increasingly, families depend on the income of two working parents. If you’re a working mother, your income can have a significant impact on the quality of your family’s lifestyle. Your income helps cover the cost of ordinary living expenses such as food, clothing, and utilities, and it provides savings for your children’s for college education and for your retirement. Life insurance helps protect your family by providing proceeds that can be used to replace your lost income if you die prematurely.

Single women

Women, like men, often think that it’s not necessary to buy life insurance because they have no dependents. What’s often overlooked is that life insurance can provide necessary funds to pay off car loans, education loans, debts, a mortgage, taxes, and funeral expenses that might otherwise be the responsibility of family members. Also, the cash value of permanent life insurance may be used to supplement retirement income.

Single moms

Whether you’re divorced, widowed, or a single mom, you’re most likely primarily responsible for your child’s support. If you die prematurely, life insurance can provide ongoing income to cover child-care costs, medical expenses, debts, and future college costs.

Stay-at-home moms

Maintaining a household is a full-time job, and you have many important roles and duties. The cost of the services performed by a stay-at-home mom could be quite significant if someone had to be hired to do them. If you die, your surviving spouse may have to pay for services such as child care, transportation for your children, and housekeeping. Taking over these added responsibilities could cause your spouse to shorten work hours, resulting in a reduction in income. Proceeds from your life insurance can help your spouse pay for services that keep the household running and allow your spouse to keep working.

Family caregiver

Many women find themselves providing care for both children and elderly family members. Caring for an aging parent or family member can include paying for the costs of adult day care, uninsured medical expenses, and extra transportation. Adding these expenses to the costs of maintaining a household, child care, and college tuition can be financially overwhelming. Unfortunately, these added financial responsibilities often continue after your death. Life insurance provides a source of funds that can be used to help pay for these expenses.

Business owner

You may be one of the increasing number of women business owners. If you die while owning your business, life insurance can be used to provide cash for company expenses such as payroll or operating costs while your estate is being settled. Also, life insurance can be a useful tool for business owners structuring buy-sell arrangements or providing benefits to key employees. 

Life insurance types and options

Life insurance comes in many different sizes and shapes, and determining the policy that meets your needs may depend on a number of factors. Understanding the basic types of life insurance can help you find the policy that’s appropriate for you.

Term life insurance

Term life insurance provides a simple death benefit for a specified period of time. If you die during the coverage period, the beneficiary you name in the policy receives the death benefit. If you live past the term period, your coverage ends and you get nothing back. The cost, or premium, for the coverage can be fixed for the duration of the policy term (usually one to 30 years) or it can be “annually renewable,” meaning the premium can increase each year as you get older. However, the premium for term insurance usually costs less than the premium for permanent insurance when all factors are the same, including the death benefit.

Whole life insurance

Whole life insurance provides permanent coverage for your entire life. With most policies, part of your premium goes into a cash value account, which earns interest. Some policies also pay a dividend, reflecting a portion of the company’s profits from the previous year.

The cash value grows tax-deferred. You can use it as collateral for a loan from the insurance company or access it directly through a partial or full surrender of the policy.

Keep in mind:

• Taking a policy loan or partial surrender reduces the cash value and death benefit.

• It increases the chance the policy will lapse.

• You may need to make additional premium payments to keep the policy in force.

• There may be income tax implications.

• A complete surrender terminates the coverage entirely.

Note: Guarantees depend on the claims-paying ability and financial strength of the issuing company.

Universal life insurance

Universal life (UL) is a type of permanent life insurance that provides a death benefit and a cash-value account. The policy gives broad premium guidelines, including minimum and maximum payments. Within these limits, you choose how much and when to pay premiums. You can also adjust the death benefit as your financial situation changes, within the policy limits. If you want to increase coverage beyond the current limit, you must complete a new insurability process. This may include a medical exam, and your premiums will rise accordingly.

Variable life insurance

Variable life insurance is a type of cash-value coverage that allows you to choose how your cash value account is invested. A variable life policy generally contains several investment options, or subaccounts, that are professionally managed to pursue a stated investment objective. Variable life insurance policies require a fixed annual premium for the life of the policy and may provide a minimum guaranteed death benefit. If the cash value exceeds a certain amount, the death benefit will increase.

Variable universal life insurance

Variable universal life (VUL) insurance combines the flexibility of universal life with the investment options of a variable policy. You decide how much and how often to pay premiums, following the policy guidelines. With most VUL policies, you can choose how to invest your premiums among policy subaccounts. However, the policy does not guarantee a minimum cash value or death benefit. The investment return and principal value can fluctuate. Your cash value—and possibly your death benefit—depends on the performance of your chosen investments. These amounts are not guaranteed.

Joint and survivor life insurance

You and your spouse may choose to buy a single policy of permanent insurance that covers both of your lives. With first-to-die, the death benefit is paid at the death of the spouse who dies first. With second-to-die, no death benefit is paid until both spouses are deceased. Second-to-die policies are commonly used in estate planning to help pay estate taxes and other expenses due upon the death of the second spouse. Other than the fact that two people are insured by one policy, the policy characteristics remain the same.

Bottom line

Life insurance protection for women is equally as important as it is for men. However, women’s life insurance coverage is often inadequate. It may be time to consult an insurance professional who can help you assess your life insurance needs, and offer information about the various types of policies available.