Losing a spouse can be one of the most difficult events that a person could experience. It can bring a host of emotions that can overwhelm the bereaved. Life insurance was created to help those who are left to grieve without worrying about their finances.
Robert Steele, partner at Schwartz Sladkus Reich Greenberg Atlas LLP, is head of the Trusts & Estates Department. He says that “life insurance death benefits can usually be paid within 30 day after you submit a claims.” You will need a certified funeral certificate to file a claim. This is usually issued within a week.
According to the National Funeral Directors Association, the average funeral costs will range from $9,500 up to $12,500 in 2021. Standard funeral costs are rising and some can cost as much as $30,000, according to the National Funeral Directors Association. You can reduce the financial burden by using life insurance money to pay these expenses.
Your living expenses and income do not cease after the death of your spouse. According to the Women’s Institute for a Secure Retirement (WISR), household income decreases by around 40% after the death or disability of a spouse. This is due to changes in Social Security benefits and spouse’s retirement income.
Repay your debts
As long as the debts are not in your name, you are generally not responsible for them. This includes student loans, credit cards, and business loans. Instead, the estate will pay all debts. If an estate doesn’t have sufficient funds to pay all of its debts, gifts that are supposed to be distributed to beneficiaries will be cut.
Create an Emergency Fund
A liquid emergency fund should be built using proceeds from life insurance. It should cover three to six month’s expenses. Avani Ramnani is a Certified Grief Coach (r) and Certified Financial Planner(r). She suggests that you should have more money in your emergency fund than less. You don’t have any partner who can give financial protection against financial shocks.
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Supplement your Retirement
A woman who loses her husband is more likely to be in poverty. The Women’s Institute for a Secure Retirement estimates that the poverty rate for all women 65 years and older is approximately 12%. This means that nearly 1 in 10 people live in poverty. For widowed women aged 65 and over, the poverty rate for them is higher at 51%, living on less than $22,000 per year.
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You can use the proceeds of your life insurance to help you pay for school, if you’re a widow or young widow. You could also use the funds to pay for college tuition for your children. Even if your husband has a 529 college savings account, it is unlikely that you have enough money to pay for college. Your husband’s death benefit can help you increase your 529 plan balance.