Suze Orman TwitterSuze Orman FacebookSuze Orman YouTubeSuze Orman LinkedIn
View Blog & News List

The Massive Mistake 4 in 10 Parents With Young Children Make …and how to fix it in four easy steps

August 20, 2015 at 12:00 AM

A new survey makes me sad, mad and very nervous. According to, 37% of parents with children under the age of 18 have no life insurance. And even the parents with life insurance aren’t really protecting their family, as one-third have policies with death benefits that do not exceed $100,000. That may sound like a lot of money, but it’s woefully little once you sit down and run the numbers.

I am going to be blunt: There is no way you can tell me you love your kids more than anything if you don’t have life insurance. That’s not just some odd disconnect. It is dangerous. And it’s your kids’ future you are putting in danger.

Here's how to get over your life insurance phobia and protect your family:

Step 1: Acknowledge it is financially irresponsible to not have life insurance if there is anyone dependent on your income. And let’s be clear: any young child is dependent on you. In fact, if your intention is to help a child attend college, you need to think about protecting them through age 22.

Extra tip: Stay at home parents need to have life insurance on their life as well. Just imagine how your family would operate if the stay-at-home parent died. Chances are the remaining parent would need a whole lot of support, and while family and friends may step in for a good chunk of the help, it’s smart to assume that the surviving spouse would also hire some help as well.


Step 2: Calculate your dependents annual income needs. Multiply that sum by at least 20. Carefully think through how much money your family would need to maintain their standard of living, if an income-earner dies. I want you to multiply that amount by at least 20, to get what your target death benefit should be. That is the sum your heirs will receive if you die while the policy is in force. Why 20x? Because I want your family to be able to invest the money conservatively--say in high quality municipal bonds--and live off of the principal. And if a goal is to help pay for a young child’s future college costs, that too needs to be factored into this calculation.

Step 3: Relax, a large death benefit does not mean a huge premium. Don’t freak out about the 20x rule. Yes, if your family would need $70,000 a year if you died, that works out to a big death benefit of $1.4 million. But stick with me here, this isn’t going to break the bank. If your goal is to protect young children until they are independent adults, you only need to purchase what is called term life insurance. The term is the number of years the policy will remain in force. That can be 10 years, 20 years, or more. If you die while the policy is in force, your heirs receive the death benefit. After the term expires, so too does the policy. Because the odds are high that you will in fact live past when the term expires, these policies are much less expensive than “permanent” life insurance policies that never expire. For example, a 35-year-old male in good health will likely pay less than $170 a month for a 20-year term life policy with a $1.4 million death benefit.

Step 4: Shop online for a guaranteed level term policy. With a level term policy your annual premium will never change—it is level throughout every year. I think that’s the smartest way to go, so you don’t ever get hit with any adjustments. The teams at and work with a variety of financially strong life insurance companies, and will help you work through the right death benefit needs for your family.

Tag Cloud

Easy Life Insurance Long Term Care premiumsvalue moneymortgage disclosuresetup automatic savings withdrawwaive home inspection bidNewtownkid borrow firstUrbana-Champaignstore credit cardsstudent loan debtcnbc alarm clockpositiveSuze Orman spouse Kathy TravisRetirement Incomeemergency fund Giftsyours, mine & oursbetter termsbreakdown projected monthly housing costuniversal college accesscredit reportSandy Hook Elementary Schoolprotect and provide for minor child Long Term Care shoppingrent vs buybetter loan dealspaid in fullco-sign multiple lendersconsider roth 401(k)money-aware childPrime Rate Increaselow mileage discountCollege of Veterinary MedicineWarner Bros Television GroupHoliday SeasonCivil Rightsdoctor no longer in networkfinancial goal phraseanticipated salarydon't cover cosmetic dentistrybuy down public service loan forgiveness program20% down paymentmonthly benefit social workcommitbe true to yourselfone credit cardInterestrequired disclosureunsubsidized Stafford loantake actionis it necessary?summer job match income interest on student loanssuccesssecured cardPhyllis Shelton expert long-term carethree year car loansecure creditis it true? family save at least $100 monthlyautomatic paymentFinancial Power of Attorneyget over life insurance phobiaStock InvestmentsBankruptcyplanstudentno apologylearn good financial choices40% toward financial goalFICO at least 720buy home you can affordwives should be involved in retirementLTC shoppingprescription tierWashingtonletter to suzeFinancial Awarenesslow down paymentincentives for health care wellness screeningdental discount planSuze OrmanPost-Divorceraise deductiblesdon't buy wantsschedule vacationcalculate dependents annual income needslet them have 50% controldebit cardcollege studentPay Off Debt Before RetirementMost Influential Celebrities Listsocial security never insolventno retirement funds for down paymentitemized deductionFHA loan feesFixed Rate Mortgagedebt freehighest possible benefitignore 6 month grace period permanent life insuranceloved ones dependent on incomeaffordability401KETF'sincrease emergency savingspay down car loanescrowresponsibleemergency fund savingsterm insuranceMortgage Credit Availability IndexEric Dodge teens and moneyadd teenWillconfident of solutionmortgage brokerface your financial fearno splurge gift up to 14,0008 month safety netSchool of Social Workreduce monthly paymentcost of capitalization calculatorEmployer Matched Contributionrefundjanuary billsdon't ignore open enrollmentdo you need life insurancePersonal Finance3 bucket approachincreased auto insurance premiumno negativitycredit managementclosing costs 2% of loanpay more than minimumsavingsdoctors in networkwomen longer life spangrandparent IRA contribution verify retirement plan with HR or plan sponsormax benefit coveredlower overall drug coststudent loan repaymentgift not loanfederal student loan deferment ultimate compounding giftfinancial aidone annual feekids schedule payments2015 record year car salesbalance transfer switch to roth 401(k)Long Term Care Insurance protect your familydon't do five year car loanOverspendingcostly legal speak new goalHDHP's are good for youconfidentage appropriate choreAARPreduce interest ratemonthly dental insurance premiumMoney-Savingbest interest ratesDeath Benefitnot enough life insurancetax ID theftdebt20 year level term replace permanent life insurance with termno private loans2015 financial roadmapExhibitionheartachechildren under 18negotiate points with bank or sellereliminate credit card debtincrease retirement savingshousing market15 year mortgagedear suzequick closingshort term goal unexpected expenseLTCi ASAPallowance taskspring summer dream schoolConventional loan PMIlong term goal20% equitygraduationFinancial Awareness Video FestivalTelepicturesclosing feesfour steps to retirement savings CPI-Wbad decisionsSandy Hook Promisehigh premiumsalways use all paid time offFinancial Cliff2017 Taxescompare monthly expenseshigher monthly payment2016 adjust withholdingfile taxes quicklysidelinedCommencementOne Wallet At A Timeborrowing plan don't derail retirement savingslowest cost fund optionhome related tax break bonus Jose Rodriguezcomparison shopping10% donate to charityno sneaking in feeshealthy aging healthy gumsFundsno private loanknow before you owecan you afford itPrime Rate Rise 2015dangerous retirement plannon conventional routecollege graduatedeath benefit 20 to 25 times annual incomelower premiumgift grandchild IRA contributionUS Tax Codesame sex marriage band end Floridahome buying budgetlife insurancepaying for collegesocial security not going brokedental insurance Amy Lacyetfocus on new truth financial argumentsFinancial Gift Cliff6 month waiting periodchildren's bookcouple financesbudgetopen enrollment review protect dependent High FICO Score = Better Ratedental savings planChanging LivesCD'scompare provider pricingRetirement SavingsHeartFiscal Responsibilitylousy investmentalternative FICO scoreGoodbyestay positiveritual schedulewomen outlive menis it kind?holiday spending3 savings buckets premiumnear historic lowsHDHP'scredit cardFICO ScoreFRAbuying a carFederal PLUS loanmarriage inequalityRichraising interest ratesno fee transferLifestylelower mortgage interestprovider of financial supportrequire chore in exchange for allowancetitle insurancefull retirement ageCredit scoreearn allowanceworkaholicwomen live longeroverspend on giftsborrow each year, capitalization is going to pile up LTCstudent loan repayment planinsuranceretirment savingscredit utilization ratetoo expensive schoolSelectQuote.com4 Must Have Documents HDHP/HSAfraudulent return30 year mortgage Suze Orman Scholarship20% down payment avoid feeslong-term care low credit scoreretirement planretirement accountslong term carebig results real estate marketsavings pleasurefinancing car lower rateStudent Loan3 step financial road mapmaintain standard of livinghome buying mistakesYoung Adult best loan deal new carinterest capitalizationincrease retirement contribution rateunder 18 financial giftallowanceARM CautionMass Mutualmental healthraise insurance deductibleAARP Social security calculatorCiti Simplicity Card SatisfyingMotheroverspend on nights outdo not pay allowance for good behavioreight month living expense community collegeleave a legacyautomate student loan paymentsHolidayForbes Top 10advice for college graduatesFinancial AdviceLovebad retirement planningshop online guaranteed level term policyStaffords this year have a fixed 6.8% interest ratezero rate transfer dealsCommunication Skills CNBCorigination feesloan is giftinitial tax break Suze Orman's Money Warshealthy teethhealthy you740 credit scoreCredit Card Rate Increaseenjoy saving Suze is my biggest mentorloan big picture raising mortgage rates back-to-school budgetpurely financial standpointrolloverpowerful20 to 25 times annual incomestaycationpush yourself to save more for retirement15-year refinance dealsave moneyapproved medical 100% tax-freeoverspend on dining outHow To Build Creditpay 100% cashearn more on savingsemotional stakesget health insuranceretain separate credit cardsreduce withholdingGracebuying car 2016Final Goodbyeteach your child good money habitsSelfishautomatic withdraw to savings adult childrenVital Documentscreate new truthdangerous money seasonpercentage men widowed 75-84FICO credit score credit card mortgagedon't extend mortgage ARMBankvalentines dayNew York Lifemax employee matchreal estate mistakesmortgageidentity theftAccuQuote.comterm life insurancegrandchild summer job IRA contributionmarriage financial responsibilityAdequate Auto and Home Insurancelower interest rateemployer funding HSA3% debt transferred high FICO scoreloan no longer than 36monthsHigh Credit Scoreverify wellness screening and programsshorter payback periodHDHP Revocable Living TrustSave Us Moneysave Must Have Documentsrefinancemake saving a pleasurefinancial independenceretirementclosing disclosuredeath benefit needs for familystandard deduction protect loved ones become member Minor Children low-cost index mutual fundavoid burn outadjust allocations New american Dream paid vacationcontribution Ashley Springerget the most out of social security school would you decline a bonusRoth 401(k)not gender specific teach importance of helping others19 years cash flow problemFederal Funds Ratereferrals Gay Couplesdon't use allowance as bribeDurable Power of Attorney for Health Caresame-sex marriagemoney vowshome ownershipAuto Savings iffy incomecontribute household expenses car buying mistakesbe kind to yourselfno late fee derailed planidentity frauddon't defer interest paymentskeep a schedulemortgage interest tax deductionSpendingstandard rateBill and PennyFinancial Educatorrising home pricesInfluentialsis it necessaryFinancialhome buying seasonmobile app401(k) ContributionsThe Suze Orman ShowFinancial Systembe good examplefinancial fearsForbesswitch to spouse coveragepreexisting condition not coveredphysical healthCombo Insurance ProductsAmericans don't use all paid vacation timemanage student loansInvest for savings growthcar loanpay down student loan debtLegal Guardianhealthy retirement blood pressureCory Bookerstrained relationshipStudent Debtcut monthly cable billinsurance yearly reviewbuy homepay off debtaccelerate dental workback door Roth IRAFinancial Solutions For YouForeclosurebetter loan ratescredit unioncharges on credit cardMarlo Thomasstudent loan repayment estimatorFederal Stafford loantaxesCOLAteens2016 adjust estimated taxstretch out haircut appointmentsbill paying prioritiesrepay student loansfocus on needsno tax on withdrawlshome loan credit score below 740 Revocable Trusthigh credit score discounttraditional vs roth 401(k)exercise reguarlypay interest while in schooljuggle multiple financial goalshome insurancedon't spend Suze approvedpresident Obamasmall changes women long term caredon't charge a pennydon't blow tax refundaffordable premium50 over 50percentage of women widowed 75-84Money Marketloan necessity8 Ruleswrite new goalEmergency Savingscostly insurance mistakeUniversity of Illinoisburn outVeterinary SchoolSuze changed my lifepay credit debt ASAPsocial securityBeautylive below your meansonly offered while employed high down paymentlong-term care premiums!00% tuition paidFree Debt EliminatorGay RightsTeachHoliday ShoppingMoneycar leasinghigh deductible health care planHSA tax savingsBaby Boomerspay high rate off firstworst financial mistakeIRA contribution gifted moneypeace of mindroth iraspecial saving accountresponsible with moneyhigher insurance deductibleUniversity of Floridaovercome financial fearspoint cost offset by savingsgay marriage ban end Florida no interestfinancial concernmax employer matched 401(k) contributiononly refinance if it paysFederal Reserveat worst still pay 75% benefitage appropriate goalscommunity bankInflation Benefitpublic service career student loan repayment no waiting periodWall Street10 year repayment plan Student Debt Crisisannual cost of living adjustmentcut monthly cellular billraise your deductibleno life insurance financially irresponsibleSwap Older Annuities or Life Insurance file asaplife insurance name trust as beneficiaryproperty taxtelevision hostget credit cardhome budget after tax cost8 month emergency fundhealthy retirement weightemployer offered life insuranceAlarm ClockGiftdepreciating asset tax refund fraudInfluential CelebrityHDHP's are not badPBS Specialmeet monthly Credit Card Interest Rateinsurance mistake

View Blog & News List
People First. Then Money. Then Things.
Connect with me on Facebook Connect with me on YouTube Connect with me on Twitter
© 2017 Suze Orman Media Inc. All rights reserved.
 |  Search  |  Sitemap  |  Privacy  |  Terms
Sign Up For E-mail Offers
Open Panel
Close Panel