Episode Transcript
As a couple, had you talked about life insurance? Had you talked about planning?
He always liked to talk about it. [LAUGHS] I hated talking about it. I didn't want to think about anything happening to either of us.
Life insurance probably isn't on most people's radar. At any age, we need to start thinking about how I want to protect the people that I care about.
Nobody is guaranteed tomorrow. I think about that every time I put my kids on the school bus.
[MUSIC]
It was her darkest hour, but a choice her husband made allowed her to focus on her kids when they needed her most.
Hi, welcome to Money Unscripted, a podcast from Fidelity Investments. I'm Ally Donnelly. Today we're talking about life insurance. Of course, no one wants to talk worst case scenarios, but proper planning can be a real measure of relief for your family. So big questions, who needs life insurance? How much is enough? How much does it cost?
We're going to answer all of those questions and dispel some myths that might be holding you back. First, I want to share Laura's story. She never wanted to talk about life insurance with her husband, but when the worst happened, she was so grateful for the decisions he made.
He was warm. He was funny. Without any effort at all, he just brought light into any situation.
Craig and Laura McCullough were high school sweethearts. They were just 15 when they started dating, eventually getting married and starting a family.
We had a hard time having kids. It was five, six years before we had our twins. I can remember during those years thinking, I can't imagine going through this with anybody else.
OK, come back.
[CHEERS]
And our third came on very unexpectedly, in the way that the youngest always does.
(CHUCKLING) Yeah.
And for the two years after we had her, I mean, life was just easy. It was perfect.
Part of that perfect was a house on Cape Cod, a joyful life at the beach where they were busy making memories.
It was a totally normal morning. We had friends down at our beach house, and I remember that was the last time we saw him alive.
[GENTLE PIANO MUSIC]
It was a summer day in 2018. Craig had taken their youngest up for a nap, and when he didn't respond to her texts, Laura went to check on him.
I walked in and saw him on the floor. And that was the most traumatic moment of my life.
Her husband of 13 years, the father of her children, gone in the prime of his life at just 39.
You know, there's always going to be a gaping hole where he was.
As you're going through that time, you're navigating your grief, obviously, for the love of your life. But you're also a mom.
Yeah. It was literally, at first, I could think of one moment, one task, from one moment to the next. At first it was literally like, OK, I'm going to get out of bed and brush my teeth. OK, I'm going to get out of bed and I'm going to get some breakfast together for the kids.
Soon came the realization that life couldn't be over. I have three little kids, like they have to be OK. We have to be OK. [VOICE CRACKING] There isn't a choice in this. And so that realization came on pretty quickly, you know. Just because daddy was gone and wasn't coming home, they still needed to have diapers changed. They still needed to have food on the table. They still needed to have good night cuddles.
And so it was pretty quickly that we had to-- I had to get myself together in order to get them together.
The late night cuddles, but too, you have to think about your finances and what you're going to do. What were you thinking about what was what?
Yeah. So in the first few days, it was hard. I mean, I didn't know what our financial position was. I can remember saying to some of his friends, I don't even know if we can afford ballet lessons. I don't know what our life was going to look like. And I know in some ways I was really lucky because one of the first things my mother said to me right after is, You can come home and you can come live with us and we'll take care of you.
But (CRYING) I knew that's not what I wanted for my family. I wanted them to live and grow up in the place that they had been born.
Yeah.
In the place that they had been born and the place that we had wanted them to grow up.
What was that feeling, that uncertainty, that fear, what was it? How would you name it?
It was terrifying. I was paralyzed with fear. All of a sudden, I lost my person.
Had you and Craig talked about life insurance? Had you talked much about planning?
So Craig was a financial planner, so he always liked to talk about it. [LAUGHS] I was very much the opposite. I hated talking about it. And I could be somewhat obnoxious about avoiding the conversation.
[LAUGHS]
I couldn't even think of something happening to one of us. And I kind of labeled him as being a worrywart for thinking about it.
Craig was a worrywart. He did think about it, and planned for that unimaginable possibility of a life without him. He made sure there was enough life insurance to protect Laura and the kids and the future they had wanted for them.
I knew that we'd be able to stay in the house that we had bought. I knew that I'd be able to send the kids to college, that we would be able to do ballet lessons and baseball. And while it was going to be a different life, it was going to be OK.
What's changed in how you talk about life insurance to your friends, other women, other people?
When I talk to people about it, as uncomfortable as the conversations are, as sometimes inconvenient as getting the physical exams or how the paperwork can be, it's that important. You know, nobody is guaranteed tomorrow. And I think about that every time I put my kids on the school bus. [VOICE CRACKING] And it's just important that I know that they'll be OK if something happens to me.
[GENTLE PIANO]
As the years passed, Laura found love again. She remarried, and she and her husband Kyle are raising their five children together. And she says, in a way, Craig helped give her the gift of this new life, to be in a place where she could be open to a new happiness.
There are definitely times that I feel his absence more than others. But my kids are OK. They're more than OK. They're fabulous. They have a great stepdad who's wonderful to them. They have two new, amazing siblings. Life is good. Even when it's hard, it's good.
Cheese!
We're so grateful to Laura and her family for sharing their story. I want to bring Amy Sutton into the conversation now. Amy is a Regional Planning Consultant here at Fidelity. And I'm so glad you're here. Hi, Amy.
Thanks for having me.
Yeah, so tell me what it means to be a Regional Planning Consultant.
Well, if I could sum it up, I would say that it means that I help clients to build a plan to protect their families and the people they care about.
OK, so big part of planning--
Yes.
--life insurance. You know, we saw what measure of relief that brought for Laura during a really terrible time. But if you're not in crisis, life insurance may be something over here that you don't want to think about, you don't want to talk about. So how should we be thinking about life insurance at different points in our life?
Yeah, that's a great question. Life insurance probably isn't on most people's radar, right? It's not something they're waking up and thinking about, but they should be. So it's something that, at any age, we need to start thinking about, how I want to protect the people that I care about. Or if I have any debts, anything that I need to look at, making sure are paid off, that I'm not leaving as a burden behind to people if something happened to me.
OK, so let's go through the basics. How does life insurance work?
Yeah, so life insurance works where you are going to pay a premium payment to the insurance company and in return, they are going to give you a lump sum payout. You get to determine how much that payout is going to be based on how much you want to pay, but you're going to pay that either monthly or annually to the company. And then your beneficiaries will receive a payout in the event something were to happen to you.
And that payout, how can they use it?
They can use that any way they want. So I would say what we mostly see is that they're using it to continue their lifestyle, right? So they want to be able to continue living the same way they were. They also can use it to help cover any additional costs. So if you have an outstanding mortgage, if you have credit card debt, any outstanding student loans, that you want to think about, because that will also be another way that you can use it.
And then future costs. So you've got to think about, how old are your children? You know, are there future costs like college, weddings, that you'd want to make sure are accounted for.
OK, that makes sense. So as you start to look into life insurance, you see two kinds, mostly. Term life insurance and whole life insurance. What's the difference?
Yeah, so the difference is term life insurance, just like the name, it is for a period of time. So it's a term, meaning 10 years, 20, 30 years that you can purchase a policy for. So you're going to pay that premium for that period of time. And then in return, you would have that lump sum payout if something were to happen.
Now it ends at that period of time. So if you do a 10-year, at the end of that 10 years, it's over. Where with a whole life insurance policy, that is what we refer to as a permanent policy. So that just means that you're still paying that premium payment, but this is now covering you for your whole life. So it's not going to go away at a certain period of time.
Now what we find is typically when people are younger, it's a lot more cost effective to have term insurance, right? It's going to cost a lot less, and we typically need more. So we need that lump sum payout to be a much higher amount. As we age, we need less life insurance. So that's where maybe permanent might make more sense.
So one might be during my prime earning years and one might be as I'm older and don't need as much, is what you're saying.
Exactly.
OK.
Yes.
To be clear, for this conversation, as we move forward, we're going to be talking about term life insurance, the more affordable of the two options.
Yes.
So, you know, I'm sure you hear this question all the time, but how do I figure out how much I need?
Yeah, absolutely. It's a very common question. You may want to consider about 10 to 12 times your annual salary, plus any bonuses. So what income you have combined. That's a good starting point, but I wouldn't say that's where it ends. So, for example, I'm a single mom. I have been raising my daughter for over 15 years on my own now. And immediately after my divorce, the first thing I did was get life insurance.
I knew I needed it. I didn't have it before that. And so I did look at my annual salary, but there was so much more to that I needed to look at. So I looked at replacing just all of our everyday. What activities is my daughter in? So those essential expenses, plus those discretionary expenses. But then in addition to that, I looked at, How much do I want to leave her behind? Because I needed to think about future costs. Eventually, she may want to go to college. She might get married.
So it was important for me to include all of that. And then we had a mortgage. I needed to make sure she wasn't burdened with any student loans, any mortgages, any credit card debt. So all of that is what you want to consider when you're really thinking about, How much insurance do I need?
Yeah, it's interesting you got granular, like what activities she does. Like, that really struck a chord with me when Laura said, I don't even know if I can pay for my daughter's ballet lessons. Like that really, mom to mom, that was revealing to hear.
You talk about yourself as a single mom. How does gender play a role in how you decide these things?
Yeah, gender plays into this conversation in that women are typically those care givers. We're taking care of everyone around us and we forget about ourselves, right? So women, in comparison to men, we just don't own life insurance like men do.
Because we're not getting it.
Right. Exactly. And when we think about it, think about everything that women do. So the day-to-day responsibilities. They're taking care of everyone. They may be taking care of aging parents. They may be taking care of children. Maybe they have siblings with special needs. There's a lot of people depending on women. And so we really need to think about all the services that they're providing as well.
So if something were to happen to them, maybe you would need, as a family meal replacement. Things like that you don't really think about.
There are myths that I hear you talk about with life insurance, so I want to just run through them. Myth number 1, Life insurance is expensive.
Yeah, that's a common myth. So life insurance, I would say, is not expensive, especially term insurance. It is so affordable. And really, you can fit this into anyone's budget. So you can pay for this monthly. You could pay for this quarterly, semi-annual, annual. Maybe you need a set amount, but maybe you're also overshooting. Maybe that's why it's a little more expensive. So we take that number down to make it affordable.
OK. So as you're saying, like you can fit it into your budget, you can figure it out. How do I figure it out? How do I figure out how much I need?
So we talked about earlier that 10 to 12 times estimate of your income, bonuses. So we have a needs analysis that you can go right online on Fidelity.com. You can be able to put in exactly what your needs are. So it will calculate how much insurance do you need based on your lifestyle and your situation.
So give me an example. What are some formulas, so to speak, or what are some outcomes that you're looking at?
So an example would be a 35-year-old female, a 35-year-old woman purchasing a 20-year term policy for $500,000. That would be about a little more than $17 a month if she was in excellent health. Now, let's say she's in average health, then it would be a little over $34 a month.
So as you age, you may see those costs going up. As your health maybe changes, you might see those costs going up. So typically with insurance you're looking at, are you in average health, good health, or excellent health? But it's still going to be affordable, even if you're an average health. So maybe you have high cholesterol. You've got something going on that you might be more rated into average health.
How important is it to be transparent on those questions about your health?
It's so important to be honest about your health, absolutely. And if you do have something going on, it doesn't mean that you're automatically not going to be able to get insurance. They do look at, on the application process, during underwriting, they're going to look at your overall health. So they're going to assess, What is your overall health? But also, what are some of the risks that you're taking too, in your lifestyle?
So that all works into that price. But it is so important to just be up-front and honest about your health.
So I'm not going to get boxed out necessarily if I'm transparent.
Right.
OK. Myth number 2, I don't need life insurance until I'm older or I'm a parent.
Yeah, that is a big myth. So we would say, if you have any life event that happens at all, you get married, you get divorced, you do have children, you have anything that you just want to leave as a legacy behind. Or you have debt, student loans, mortgage, that you don't want to leave as a burden to other people. That would be a reason to have life insurance.
I always boil it down to, Are there people you care about and love that you want to make sure are taken care of? And do you have any outstanding debt?
This is a big question I had. It's benefit time or you're starting a new job, and you're clicking the box of life insurance through your employer. Myth number 3, life insurance that I can get through my employer is enough.
So I would say, on average-- remember, we want to aim for 10 to 12 times our annual salary and bonus. When we think about our employer insurance, most of the time, it's covering us for maybe one time of that annual salary. Sometimes too, it's not even giving us that amount. And if you were to leave your employer, remember, that goes to 0. So you no longer even have that insurance policy.
So it's important to think about. A lot of families have shared that they would struggle within six months if someone were to unexpectedly pass away because it just isn't enough.
So if you lose your job, you leave your job, it doesn't come with you. It's over.
Yeah. So I would definitely elect to have that, but I would also have an outside policy as well. So that's where having an additional term policy would make sense.
OK. And you can have policies at the same time.
Absolutely.
OK. Myth number 4, I only need life insurance if I'm working.
We would definitely say those non-working partners, spouses absolutely need life insurance as well. We talked about it earlier. Think about women or anyone in that role that's being a caretaker at home, replacing them. What would the cost be of replacing that person? They may not be earning an income, but are they providing childcare? Are they doing the different things around the house, different activities that you would need to now have a housekeeper come in? Maybe you need to do a meal service.
So there's a lot of things that go into. Somebody not working still needs life insurance.
Yeah, yeah. As we talk about term life insurance, and I know, 10, 15, 20, 30, you've talked about. How do I figure out how much time I should put into that term policy?
I think it depends on what your age is and your situation. So for me, when I had gotten divorced, my daughter was young, she was six years old, so I knew I needed to have a policy covering me for a while. So I got a 30 year term to make sure that was going to cover for her to be grown and out of college.
So it just depends on your situation and how long you're going to have those expenses for, how long you're going to have children in the home, or future costs. At some point in time as we get older, it is going to get a little more expensive with term insurance. And so you just want to make sure it's matching what your needs are.
OK, OK. How often should I revisit my insurance needs?
Yeah, so we would say that want to revisit your needs whenever you have a major life event. So if something happens, you get a new job, you move, you have a divorce, a marriage, new child added to the family, something that changes the dynamics of your situation, that's when you want to revisit and look at your needs.
OK. Final takeaways. As I'm leaving this conversation, what do you hope I take with me?
Yeah, so I hope you take with you to do your research. Go out, find some reputable companies, and do some price comparison. Just look and see what the different prices are out there. And when it comes to term insurance, and we talk about it being affordable, look at maybe-- we talked about that example of it costing close to $40 a month. Maybe that's not as affordable and you need to look at maybe lowering the term. Maybe it's not 20 years. Maybe you do 10 years or you do a little bit less in coverage to get that into your budget.
But you can go out and be able to figure out how much is going to be the right protection to protect the people you care about.
Awesome. Amy, this has been such a valuable conversation. Thank you.
Thank you so much for having me.
And thanks to all of you for being here. If you still have questions about life insurance, head to our website. Fidelity.com/MoneyUnscripted or check out our show notes. You'll find that quote tool we talked about, articles, and other resources to help you figure out your own coverage needs.
We'll see you next time on Money Unscripted. It's your life. Get your money's worth.
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