Savings account? Check. Retirement account? Check. Debt managed responsibly? Check. Life insurance? Wait a minute ...

Protecting your financial security is about more than having money in the bank now and in the near future. It’s also about long-term financial protection for your family. However, a significant share of Americans, especially women, are putting their financial security at risk.

It’s estimated that one in three U.S. households have no life insurance at all, and for those that do, on average they only own enough to replace their household income for three and a half years, according to 2013 “Facts About Life Insurance” from LIMRA, a leading life insurance research organization. What happens to your loved ones after that?

Women are particularly vulnerable. They are the sole or primary breadwinners in a record 40 percent of U.S. households, according to Pew Research in 2013. However, women are not adequately protecting their salaries. LIMRA statistics from the same year indicate women are underinsured, carrying only 69 percent of the average life insurance coverage compared to men.

“Every woman and her family need to stop and take a moment to understand the value of what she provides at home and consider the importance of protecting her income in the event something happens to her or her spouse. And, if she is a single mom, it heightens the importance,” said Cynthia Tidwell, President and CEO of Royal Neighbors of America, one of the largest women-led insurers in the United States.

“Life insurance can help replace your salary, pay off a mortgage, cover childcare expenses, or protect college dreams if you die prematurely,” Ms. Tidwell continued. “Families need to be protected from the unexpected.”

Know your worth
There are several misperceptions about why women or their families may not have enough life insurance.

First, said Ms. Tidwell, “Women tend to undervalue their worth because they think if they do not bring in a higher salary than their partner, they don’t need coverage. Actually, all wives and mothers contribute to the financial security of the family, whether they work outside or inside the home.”

Life insurance can help replace a lost income for a working mom or all the contributions a stay-at-home mom makes to the family.

There are options to meet various situations. One economical option to consider is term insurance for families. Term insurance provides coverage at a fixed premium amount for a specific time period. Think of it as “renting” life insurance for a set number of years.

It is an affordable choice to protect income and meet family expenses such as paying the mortgage or other debts.

Protect your long-term goals
A second misperception is that life insurance only pays for funerals.

“The fact is, life insurance not only pays for funerals, but can also provide an ongoing paycheck, protect your current lifestyle, or ensure your children’s college dreams still come true,” Ms. Tidwell said. LIMRA’s 2011 “Trillion Dollar Baby” report recommends that while typical families average enough coverage for three years, adequate life insurance protection starts at twice that, from seven to 10 years.

Youth is on your side
A third false belief is that insurance is for older people with children.

“People don’t realize that it’s better to purchase life insurance for yourself or your children at a younger age because the cost is generally cheaper the younger and healthier you are,” Ms. Tidwell said.

She recommends purchasing permanent coverage (whole life insurance) because policies will build cash value. (Think of it as “buying” insurance rather than “renting.”) Another option is to look for economical term policies that can be converted to more permanent insurance no matter what happens to your health. You hear “experts” suggest buying term and investing the rest. However, most people who buy term don’t invest the rest.

Get educated
A final stumbling block to adequate life insurance coverage is simply confusion about where to begin. “We hear this often,” commented Ms. Tidwell. “Royal Neighbors was founded nearly 120 years ago to help women get financial protection. The fact is, women do need to become educated, and it’s important to take the first step. But with the right guidance, they can come to an easy conclusion on what is best for them.”

A quick and easy way to see how much life insurance you may need is to try an online insurance calculator, such as the one available at www.royalneighbors.org. Factors include your age, income, and current expenses. The calculator also explains the different types of coverage and what might fit your needs best. In addition, the website provides easy-to-understand information on the different types of policies that are available.

1. How much will it cost to pay off your debts such as a mortgage, credit card payments, and auto or other loans if you were to die prematurely?
2. What are your ongoing expenses? Don’t forget daycare, tuition, grocery, and energy bills.
   
3. Would your family be able to pay its bills? Nearly two-thirds of financial decision makers admit they would have trouble paying everyday bills within a few months, according to the “Trillion Dollar Baby” report by LIMRA in 2011.
   
4. Do you have enough to pay for funeral expenses? In 2012, the average funeral cost about $7,000 according to the National Funeral Directors Association.
   

For more information about life insurance options, visit www.royalneighbors.org or call (866) 845-6665.

Photos courtesy of Getty Images

Sponsored by Royal Neighbors