Forget the necktie -- give Dad something he can really use this year. We're serving up plenty of Foolish ideas to help you out.
We celebrate fathers because they do everything they can to love and protect their families. When it comes to family finances, there's one simple thing dads can do to protect their loved ones from unforeseen tragedy.
So after you open your brand-new tie and enjoy your traditional meal of burgers and hot dogs on the grill, do something else that's almost as fun: Look over your life insurance coverage.
Fun?
OK, maybe the idea of reviewing insurance policies on Father's Day gives you as much pleasure as having your son give you a bottle of Old Spice for the eighth year in a row. But if your family relies on your paycheck to cover household expenses, they'll be in a world of financial hurt if something happens to you. In addition to the stress and trauma of losing you, money matters can quickly get out of control at the time your family is least able to deal with them.
If you're skeptical about insurance in general, you're not alone. The insurance industry suffers from a reputation of aggressive sales tactics and high-commission products with fees and surrender charges. But the ironic thing is that while many people who buy life insurance may not really need it, many dads who are perfect candidates for useful life insurance coverage don't ever get around to buying it.
Do you need it?
Most dads have a few things in common that make insurance a good idea. First, they bring in part or all of the family's income. Even though there are an increasing number of two-earner families, losing half or more of your household income can have a devastating impact on the family's finances. Second, they have others who depend on them financially. When you don't have a spouse or kids, there usually isn't as much riding on your finances after your death; you'll typically have enough to cover final expenses, and anything left over goes to your parents or siblings.
So the real question becomes whether you've got enough in savings to provide for your spouse and/or kids if something happens to you. For most dads, the answer is no. If you're 40 and make $50,000 each year, your family will miss out on more than $1 million that you would have earned during the rest of your career. Losing those resources will change things dramatically. Although some people have group life insurance through their employers, the policies usually only pay one or two years of your salary. That usually won't be enough to see your family through.
Cheap and easy
If you're in good health, life insurance is relatively inexpensive. According to the Insurance Information Institute, a 40-year-old man who qualifies for preferred rates would pay an average of $340 in annual premiums for $500,000 of term life insurance coverage. Your health rating makes a huge difference, though; the III report says that the same policy for someone who only qualifies for standard rate costs $615.
In shopping for insurance, it pays to look at a variety of insurers. You can find websites that compare premiums of major insurers such as Hartford Financial (NYSE:HIG), MetLife (NYSE:MET), and AIG (NYSE:AIG). But you may get a better deal from a smaller carrier -- although you should be sure to look at its ratings to make sure it's financially stable. Your employer may offer additional group life insurance, but it's often much more expensive than a separate policy.
Be careful about what you end up buying. Term insurance is the simplest, but you may have to deal with agents trying to sell you other types of products. Although these policies, known as whole life or universal life, have some intriguing features, they're a lot more expensive -- and they produce much larger commissions for the agents who sell them. When in doubt, stick with term.
Dealing with insurance isn't fun. But making sure your family will survive if something happens to you will make you worthy of your status as your children's hero.
For more information about all different kinds of insurance, check out the Fool's Insurance Center.
Fool contributor Dan Caplinger made Old Spice his dad's traditional gift throughout childhood. He doesn't own shares of the companies mentioned in this article. The Fool's disclosure policy protects you and your family.
