How Life Insurance for Widows Can Benefit the Family
It certainly isn’t easy to move on with life after losing a spouse. The reality that life is too short may cause you to think about how your loved ones would cope if you were no longer around. Although nothing could ever replace you, it may give you comfort to know that life insurance for widows can help provide a secure financial future for those you leave behind. Life insurance is also more than just passing on money to your survivors; it’s the opportunity that it creates. The opportunity for your loved ones to use the gift they’ve inherited to carry on your name and preserve your legacy.
Why Do Widows Need Life Insurance?
With the death of a spouse comes many financial and legal matters to attend to: making arrangements for the funeral, updating your will, updating bank and credit card accounts, getting financial assistance for widows through government agencies like Social Security, and many more things that involve a lot of paperwork. Doing all of these things while still grieving can certainly be stressful. And now that you’ve experienced the emotional and financial impact that comes with losing a spouse, you’re probably more aware of the need for life insurance. But that doesn’t mean you have to buy a policy right away.
Actually, many financial experts recommend that you don’t make any huge financial decisions immediately after losing a loved one. You need some time to gather your thoughts so you don’t do anything impulsive that may not be in your best interest. But that doesn’t mean you should put off getting life insurance protection for months on end. There are many reasons why you need to insure your life as a widow.
Providing for Dependents Through Life Insurance
Sad to say, but it’s possible to die from a broken heart. A study published in 2013 by the Harvard School of Public Health revealed that the “widowhood effect” can cause a 66 percent chance for a surviving spouse to die within 3 months of a spouse’s death. This is an important statistic to take to heart, especially if you have young children. If you were to also die within a few months, this would, of course, be emotionally devastating for your children—not to mention the financial burden your family may face to take care of them. You could help make it easier for a loved one to provide for your children by enrolling in a life insurance policy and naming that loved one as the custodian who will manage the death benefit funds until your children become adults.
You may be thinking, “Do I need life insurance for myself if my late spouse already had a policy?” Yes, you may very well need a policy. A 2014 New York Life study on the loss of a spouse revealed that for widows whose husbands had a life insurance policy, the death benefit from the policy lasted for about two and a half years—but they wished that it would have lasted for a total of 14 years. These findings were similar to another New York Life study on life insurance gap from 2013, which found that widows age 25 and older with dependents significantly underestimated the amount of life insurance protection they needed—their spouse’s policy had provided 3 years of insurance protection, but they really needed protection for 14 years. These statistics provide even more reason why life insurance for widows should not be neglected.
Life Insurance to Help Your Adult Child Who Takes Care of You
Getting life insurance is not just for the benefit of younger children. It can also help provide a financial cushion for an adult child who will most likely have to take care of you in your older years. According to an article from the Caregiver Action Network, the typical caregiver is a 49-year-old daughter caring for her widowed 69-year-old mother.
If you’re an older widow, it’s likely that caring for you as you age will involve dealing with your health problems. If your caregiver had to help pay your medical expenses and meet everyday cost of living needs, this could become financially draining. Plus, he or she may have to hire extra help to look after you. With a life insurance policy that names your adult child as the beneficiary, he or she could replace some of the income it took to care for you and help pay for debts you may leave behind.
Life Insurance to Help Pay Your Final ExpensesLife insurance can provide financial assistance for widows to help pay for burial and funeral expenses. The National Funeral Directors Association reported that the median cost for an adult funeral as of 2014 was $7,181. This cost goes up to $8,508 when you include a vault. You may have already experienced how difficult it can be to pay for a funeral when you don’t have money saved up to spend thousands of dollars. You may have had to dip into whatever emergency funds you had or ask family members for help when your husband passed away. So by insuring your life, you could help your loved ones avoid worrying about how they’re going to come up with the money to pay for your final expenses.
How to Use Life Insurance for Estate Planning
All your assets could be subject to estate taxes upon death. If you inherited significant assets from your spouse or have a high net worth of your own, there’s a good chance your heirs will have to pay a huge amount of taxes on your estate. To possibly reduce your taxable assets, you can transfer your life insurance to an adult child. In doing so, the policy still covers you, and your adult child receives the death benefit when you die. As long as the transfer was done more than three years from your date of death, then the money from the policy won’t be counted in your estate. If you choose to keep the policy in your name, then your beneficiary can put some of the money from the death benefit toward your estate taxes. This can be a good way for your heirs to settle your estate without having to come up with out-of-pocket funds of their own.
Life Insurance as a Legacy to Your Heirs or a Charity
If you already have funds set aside to take care of your final expenses and help supplement your retirement income, you can choose to get a life insurance policy just for the purpose of transferring wealth to your children and/or grandchildren or donating to a charity. One of the main advantages of using life insurance for wealth transfer is that the death benefit is usually income tax free. This offers the opportunity to pass on the full value of the policy to your survivors. Money from the policy could help fund your grandchildren’s college education, help your children start a business, or be passed down to future generations.
Funds from a life insurance policy can also be a good way to carry on your own or your late husband’s wishes to support a charity. You could also set up a fund or scholarship in both your names to leave a legacy that could last for many years to come. In addition to no income tax on death benefits, what’s also great about donating life insurance money to charity is that no estate taxes are charged—the charity receives 100 percent of the funds.
What Are the Best Life Insurance Options for Widows?The best life insurance for widows are policies that can meet the needs discussed: providing for dependents, helping an adult child who takes care of you, paying your final expenses, planning your estate, and leaving a legacy to your heirs and/or charity. These needs are permanent, so a permanent life insurance policy would work best. There are various types of permanent life insurance you can choose from, such as whole life and universal life. Both types of policies build cash value that grows in interest.
Whole Life Insurance Coverage for Widows
Whole life insurance is one of the safest life insurance options for widows because it provides guaranteed level premiums and a guaranteed death benefit. Level premiums mean that you pay the same amount every year, which can be beneficial if you’re a widow on a fixed income. As long as the policy is active when you die, your beneficiaries will receive the death benefit. This offers financial security in knowing that your survivors will be taken care of after you’re gone. Another bonus is that policies build cash value in two ways: (1) guaranteed cash value from which can take out a loan1 that you don’t have to repay and (2) dividend cash value that you can get as cash2. These options can provide supplemental income you could use before or after you retire.
Universal Life Insurance Coverage for Widows
This type of permanent insurance is designed to change as your needs change, which may work best as you try to make adjustments to your life as a widow. You can decide to pay more or less in premiums depending on your financial situation at the time. If your policy has enough cash value, you can even use the cash value to cover the cost of premiums instead of paying out-of-pocket. If you want to pay more than the recommended premium, doing so will make the cash value grow even faster. But with universal life insurance, the policy may cancel if it runs out of cash value, which can happen if you pay too little in premiums. The death benefit can also be changed after you enroll in a policy. You can increase the death benefit, usually by passing a medical exam, so that your beneficiaries receive more money. Or, you can decrease the death benefit, which will lower your premium.
Checklist of 11 Things You Need to Do After a Spouse Dies
Emotions can run high when you’re dealing with the loss of a spouse and trying to put your life back together. So, remembering all the important stuff that needs to be done in a timely manner may not come to mind all at once. One thing for sure is to avoid making major financial decisions too soon, such as selling your house. Here’s a checklist of some of the main things you need to do after losing your spouse.
- Get Certified Copies of the Death Certificate: You should get the death certificate from the medical examiner or your family doctor within 24 hours. The funeral home will then file it with the state. But you will need to get multiple certified copies (about 24) to submit proof of death to financial institutions and to file death benefit claims. You could contact your county or state vital records office yourself or have the funeral home order the copies for you.
- Gather Important Documents: You need to organize records like birth and marriage certificates, Social Security numbers, will and estate documents, insurance policies, military discharge papers, statements for bank accounts, tax returns, mortgage documents, and car titles.
- Contact Your Insurance Company: If your husband had any life insurance policy that named you as the beneficiary, you would need to file a claim to receive a death benefit payout on life insurance for widows. Your insurance agent can handle this for you, or you could contact the insurance company directly. You would also need to file a death benefit claim for any other type of insurance your husband had, such as mortgage insurance, credit card insurance, or accidental death coverage.
- Contact the Executor of the Estate or Your Attorney: If someone other than you was named as the executor in your husband’s will, that person must be notified so he or she can complete the necessary legal steps to settle your spouse’s estate (such as filing the will with the appropriate probate court, if necessary). If you’re the executor, you should contact your attorney for help. If you have no attorney, you may want to get a trusted family member or friend to help instead of trying to do everything yourself.
- File for Surviving Spouse Benefits: If you haven’t remarried and have children under 16 you care for, you can receive benefits based on your deceased spouse’s earnings from Social Security regardless of your age when you file. If you’re not caring for a minor child, you would need to meet age requirements to get benefits. You (or a surviving child) could also receive a lump-sum death benefit of $255 from Social Security. If your spouse was a veteran, you could also get financial assistance for widows of up to $2,000 toward burial expenses from the U.S. Department of Veterans Affairs.
- Contact Your Spouse’s Employer: Speak with someone in the human resources department to make arrangements to collect his belongings, find out about any employer-provided life insurance and 401K accounts your spouse had, find out how to get pension benefits (you may need to contact past employers as well), continue health insurance for you and your dependents, and receive compensation for any unused vacation/sick days, commissions, bonuses, and stock options.
- Continue to Pay Your Bills on Time: Even though you’re grieving, now is not the time to fall behind on bills. The added stress of bill collectors calling you may be too much to deal with.
- Contact Your Financial Institutions: If your spouse had bank accounts you weren’t listed on, you need to speak with a banker about how to get those funds. For joint accounts, you would want to remove his name. Credit card companies need to be notified so they can close out his accounts or remove his name from any joint credit cards you want to keep. You also need to find out about getting distributions from any 401K accounts in which you’re the beneficiary and rolling over funds from any of his IRA accounts to an account in your name. You also need to name a new beneficiary on any of your own accounts that had your spouse as the beneficiary.
- Change Titles on Vehicles: For vehicles that are titled in your husband’s name, you need to visit your local motor vehicles department to change the title and registration to your name. If the vehicles are financed in your husband’s name, then the lender owns the title—you would have to refinance if you want to put the loan in your name.
- Re-evaluate Your Finances: Your spending habits may need to change to compensate for the loss of income. You may also need to do a new budget for short- and long-term savings goals.
- File Tax Returns: State and federal estate tax returns need to be filed within a certain time frame after a spouse’s death. States have different deadlines, but the federal estate return needs to be filed within nine months. The executor of the estate, your attorney, or accountant should help you with filing the returns. For your income tax returns, you would file by the usual due date.
In addition to the things on this list, you should reach out to family and friends for support. Not only can loved ones provide emotional support and help with your household and/or childcare needs, they can help you complete some of the tasks on this list.
Figuring Things Out With the Help of an Insurance AgentNow that you know some of the reasons why you should get life insurance, types of coverage that may fit your needs, and things to do after losing a spouse, you may be ready to take the next step by enrolling in a policy. To make sure you’re well-informed on all your life insurance options, the best thing to do is to meet with one of our agents.
A HealthMarkets agent can assess your financial needs to identify where life insurance could help fill the gaps. Just use our agent finder tool to locate an agent near you who can work with you one-on-one. If you would like to get answers to questions you may have about getting life insurance for widows before you meet with an agent, give us a call at (800) 827-9990. We’re available to speak with you over the phone 24 hours a day, 7 days a week.