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Confessions of a financial rep: You really do need life insurance

"How am I going to bury my father...the funeral home wants $5,000 before they will do anything?" There it was in front of me at a diner in Rotterdam in the Capital Region. A mother, with her young children alongside, pleading with a relative on her cell phone for money to have a dignified funeral for her father.

Life insurance exists for times like these.
Photo by John Moore/Getty Images

In my years as a financial representative, I have to say that I think I've heard it all regarding life insurance: "I don't believe in life insurance" (the most common); "I want/need my money now"; "I'll get it later"; "Life insurance is a scam"; "If I get it, I'll be jinxed"; "Just plant me in the ground."

The room of horrors

I've been there twice and it wasn't pretty. The "room" is the "planning room" of a funeral home. My visits came twice, after each of my parents passed away, ten years apart.

"This casket is made of 8-gauge steel," said the kindly but out-of-touch funeral director, guiding us through the sickening display of coffins in his showroom, a cruel twist on an automobile dealership showroom.

I thought then, "What the hell is 8-gauge steel and who cares?"

My first visit to the planning room, to plan a funeral with my mother for my dad, who passed away totally unexpectedly, was particularly horrifying. My mother was distraught, not having slept for two days. I was dazed, numb. Fortunately my mother produced from her purse a $14,000 life insurance policy for the funeral expenses. Magically, the policy was just enough to pay for the coming two days of services.

On my second visit, to plan for my mother's funeral, I was only slightly less terrified. The austere decor, the leather chairs, the grim demeanor of the staff added to my nightmare. My mother had spared us some of the trauma by making sure there was plenty of life insurance and cash. However, my sister and I had to listen to a sales pitch on the benefits of a wooden coffin. (The funeral guy...the same one as with my father, was out of steel caskets and had no choice but to convince us of the "warmth of a wooden vessel.") My sister and I nodded yes.

Anything to get out of that place, fast.

In the room with no money? Don't do it.

The point here is, at the worst possible moment, would you want to subject a loved one to being in that room with no money?

“I’ve seen a lot of sad situations in which we’ve had to counsel families into a less expensive service with a more economical casket, eliminate the limo service or even switch to a cremation instead of a full burial,” says Todd, a local funeral director. “You see family members dipping into their 401(k)s, scrounging for a loan or requesting donations to cover funeral expenses in lieu of flowers.”

Everybody should have a minimal plan to cover the final expenses of a funeral. And as for planting someone in the ground, well, New York has laws against this and it is not an option.

But if families are realistic, they're going to need money after the funeral. Lots of it. Consider my same sister, who lost her husband at 51 and left the cemetery pretty much destitute. If she had the proper amount of life insurance--really called income protection--she would not have faced two decades of poverty, unable to retire now at 63. (More on that problem next time and why she didn't have life insurance on her husband.)

I get whimisical about people's attitudes toward life insurance. Something so important has used to scam people, so I guess the fear is justified. But a consumer movement, under way in New York state, is undoing this mess. There is a right type of life insurance that is cheap, affordable and that provides plenty of cash to survivors, including children. You see, life insurance is really about the living, not the dead.

After getting whimsical, I get angry, or as Kate from Rotterdam, a widow at 37, says to every woman she can, "Do you have life insurance and if not, why not?"

Dave Balog teaches financial essentials to residents of the New York Capital region. Visit his Web site here by clicking here. Send for a free copy of How Money Works (for NY residents only). Schedule a free consultation.

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