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Financial Back-to-School Basic for Mom and Dad
by: ARA
(ARA) - Each fall, millions of moms and dads spend countless hours purchasing back-to-school necessities for their children. While some parents equip their child with the latest gizmo -- a personal digital assistant (PDA) or cell phone, for example -- most know that “the basics” like paper, pencils and folders are essential learning tools to secure their children’s future.

Unfortunately, many parents ignore a simple financial back-to-school basic. They often buy the latest gadget for their kids but then fail to carry a critical component for their family’s future and their children’s education -- namely, adequate life insurance coverage.

“If a parent is worried about his or her child’s education, he or she should also worry about having the financial protection underpinning those plans that life insurance can offer,” says Todd Gillingham, JD, CLU, ChFC, a partner with Thrivent Financial for Lutherans. “Without adequate insurance protection, every parent’s best laid education plans will fall apart under the financial burden left on their surviving children.”

Regardless of your income or assets, life insurance is the key to protecting the financial future of your loved ones and “should be the foundation on which other goals are built,” says Gillingham.

Surveys show that roughly one-third of American adults have no life insurance protection and, of those with coverage, nearly one-third have coverage that is less than one time their annual income -- not nearly enough for long-term family protection. Four in 10 single parents have no life insurance coverage of any kind. Perhaps this is why the Life and Health Insurance Foundation for Education found that nearly half of Americans (48 percent) say they are worried that if they die tomorrow their loved ones would not be financially secure.

“Various funding vehicles such as 529 plans and Coverdell education accounts can often grab the headlines,” says Gillingham. “While these are important ways of saving, they can lead parents to mistakenly ignore their life insurance needs. Such an oversight can be financially devastating.”

Without the protection life insurance offers, financial security is often illusory. In the case of premature death, life insurance helps families pay for living expenses -- including mortgage and education payments -- when the income of a loved one is lost. Without this protection, the resulting financial stress frequently undermines all other goals.

Beyond daily expenses, life insurance protects against sharp reductions in future pension and social security payments by replacing assets cut short by premature death. For example, anticipated assets in an individual’s retirement plan may be reduced by 50 percent or more simply because the individual’s death interrupts the long-term growth of the assets within the individual’s plan. Business owners and those with significant assets also use life insurance to pass those assets to their children in a tax-efficient manner or as a vehicle for charitable gifts to nonprofit organizations. Without life insurance’s special tax privileges, many families would lose the family business or not be able to leave a lasting legacy to the cause or organization of their choosing.

“These benefits aside, the fundamental reason for life insurance remains the protection of your family and your financial programs,” says Thrivent Financial’s Gillingham. “Death often strikes when we don’t expect it, so goals that require continuing funding such as a child’s education are especially vulnerable to death’s effects.”

While shopping for school supplies this fall, remember this back-to-school lesson -- the essentials come first. Says Gillingham, “adequate life insurance is one back-to-school basic parents should simply not live without.”

To learn more, contact a financial services professional, or visit

Courtesy of ARA Content

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Courtesy of ARA Content

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