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Death and Employee Benefits: How to Prepare for the Worst

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I recently read an article in the New York Times about how ill-prepared widows are, financially. It reminded me of an experience I had several years ago. I received a call from a woman in her 40s who had recently lost her husband. She didn’t know if she was going to receive any insurance benefits after her loss. She was completely unprepared and grasping at straws.

Unfortunately, when the higher earner in a relationship passes away, the household income takes a proportionately larger hit than when the lower-paid or dependent spouse passes. According to the article, which focuses on husbands and wives, “the household income for widows typically declines 37 percent after a spouse dies, far more than the 22 percent income drop that men experience. The assets of widows also tend to fall substantially more than widowers.”

Most couples don’t prepare for the inconceivable—but it happens every day.

So how can you prepare? Ensure your life insurance is adequate and your beneficiary designations are up to date. Understand what benefits coverage you and your spouse have through your employers, and read your employee benefit booklets. Record policy numbers and important contact information (such as your employers’ HR departments) and store them in a logical place that your partner knows about…not on your password-protected cell phone. If you have a safety deposit box that isn’t jointly held with your spouse, don’t forget about that, either.

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Most important: don’t wait until it’s too late. The death of a spouse will have a significant financial impact, so have the conversation now. Ask the questions, “Will I be okay?” “Will our children be okay?” and “Would you be okay if I went first?”

If you don’t know the answer to those questions, or you determine that financial hardship could result from the death of you or your spouse, consider the optional benefits your employer offers through easy payroll deductions, and talk to a financial advisor and a life insurance agent.

And sometime way down the road, I hope you’ll look back and realize you were prepared for the worst—and it never came.

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