Beyond the grieving period that widows and widowers experience after the death of a spouse, financial ramifications can leave a survivor crippled for years to come if they don’t fiscally prepared for the death of a spouse.
“The death of a spouse can have devastating financial consequences for a family,” said Joe Clauson, a spokesperson for Mutual of Omaha. “The short-term effects could include paying the mortgage and other monthly bills, but may also include the immediate event of paying funeral costs. Thinking long term, the deceased spouses contributions to retirement planning or education may have been a large part of the family’s future.”
While no one can predict the loss of a spouse, there are certain actions you can take now that would ease the financial impact of an unexpected death on your family.
You can begin by asking a few simple financial questions like, “How much money would you need to pay all of your daily living expenses and protect your livelihood?” If your spouse passed away, could you afford child-care? Would you have to cut hours and travel for work in order to take care of the kids? And if both parties were working, will one income be sufficient to include saving for retirement? Or will your income only cover primary expenses of daily living?
Bloomberg Businessweek suggests people “think like an economist” when determining how much life insurance to purchase.
Rick Blaser, Director of the Private Wealth Management team at Hartford Life, suggests the greatest risk to your financial comfort depends on your station in life. For those considered in the upper class (annual household income of over 250,000 dollars), taxes, creditors, economic downturns and divorce are the major financial risks. For those in the middle-class and below, economic downturns, divorce, and long-term care expenses are major financial hazards to avoid.
In general, Blaser says, “Financial problems are normally brought on by personal tragedy, something that can be insured against, such as death. So people should buy insurance to protect their largest financial risks.”