Family's plight shows why life insurance is essential

Dollars & Sense

November 23, 2003|By Liz Pulliam Weston | Liz Pulliam Weston,SPECIAL TO THE LOS ANGELES TIMES

My cousin, who was 42, died shortly after learning he had brain cancer. He is survived by his wife and two sons, ages 13 and 15. The only life insurance policy he had was through his employer for $50,000.

This will help pay for his burial and for some living expenses, but his lost income will significantly affect his family's ability to meet its daily living expenses. Are you aware of any programs or organizations that can assist his family?

Thank you for providing a vivid example of why life insurance is essential when you have people financially dependent on you - and why employer-provided policies typically aren't enough.

It's not as if protection is extraordinarily expensive. Before his diagnosis, your cousin could have purchased $500,000 of term life insurance for as little as $500 a year. Those proceeds could have paid off a mortgage, established a college fund for the children and given the widow some peace of mind, rather than the financial scramble she faces.

Some people avoid buying life insurance because they don't want to think about death, but people with dependent children no longer have the luxury of denial. Others avoid the decision because it seems too complicated, or they're worried about being "taken" by an unethical life insurance agent. With a little effort, though, you can educate yourself about your choices and make one that protects your family and your pocketbook.

(For more information about how life insurance works and how much to buy, you can visit www.latimes.com/insure101.)

Back to your question. Your cousin's wife and children are most likely eligible, at least for a little while, for survivors checks from Social Security. Unmarried children who are not disabled are eligible for benefits until they are 18, or 19 if they attend high school full time.

A widow or widower who takes care of children receiving such checks also can receive Social Security benefits, at least until the last child is 16.

How much the survivors get depends on the worker's earnings while he or she was alive and the age at death.

Unfortunately, the higher your cousin's income, the less likely that these benefits will be sufficient for his family.

The maximum family benefit for three surviving members of a 42-year-old wage earner is about $3,400 a month, Social Security spokesman Lowell Kepke says - and that's if your cousin made more than the Social Security maximum each year of his working life. The maximum this year is $87,000. If he made significantly less, the available benefits would be lower.

Still, something is much, much better than nothing. Your cousin's widow should contact the Social Security Administration as soon as possible. She needs to apply for benefits within six months of the death to get every dollar to which she's entitled.

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