Can Social Security Survivors Benefits Take the Place of Life Insurance?
- Social Security is designed to help families that experience income loss after someone's death.
- While those benefits can come in handy, you should still consider putting extra protection in place.
Social Security could protect your family upon your passing -- but will it be enough?
Many people are familiar with Social Security within the context of retirement. But the program doesn't only pay benefits to seniors. Social Security also provides income to the families of eligible workers who pass away.
As you work and pay taxes into Social Security, you earn credits toward future benefits you can claim in retirement. But if you pass away, your family may also be entitled to survivors benefits.
The amount your family will be eligible for in the form of survivors benefits will hinge on how much you earned in your lifetime. And those benefits might look very different for one family than another. Generally, though, your surviving spouse and children up to a certain age are eligible for some income from Social Security in the event of your passing.
Given that, you might assume that buying life insurance isn't necessary. After all, if Social Security will take care of your family in your absence, why bother paying those premiums? But while Social Security survivors benefits might help your family stay afloat in the event of your passing, they shouldn't necessarily take the place of a separate policy you put into place.
Give your loved ones the protection they need
If you pass away at a relatively young age and weren't a particularly high earner, your loved ones may not be left with a lot of income in the form of Social Security survivors benefits. That's reason enough to purchase a separate life insurance policy.
You should also know that Social Security survivors benefits are paid out over time on a monthly basis. Now that's a good thing, because your loved ones may need ongoing access to income in the event you pass away.
But Social Security won't pay a large lump sum death benefit like a life insurance policy generally will. In fact, Social Security will only make a one-time $225 payment if you pass away, provided your spouse and/or children meet certain criteria.
If your family needs to pay for funeral expenses, that $225 payment won't come close to covering those costs. After all, the average casket alone can cost over $2,000, and depending on the service your family chooses, they might easily end up with a tab in the ballpark of $10,000.
Plus, if you pass away and leave your spouse with a mortgage and other obligations that their income can't cover, the Social Security survivors benefits they receive may not be enough to keep up with those payments. But if you buy life insurance that pays out a $250,000 death benefit, you could put your family in a much stronger position to not only cover funeral costs, but also take care of any outstanding debts.
Don't depend too heavily on Social Security
Just as workers are told to save for retirement and not depend solely on Social Security for income during their senior years, so too should you consider putting life insurance in place to protect your family in the event of your untimely passing. While Social Security may help by paying survivors benefits, those payments may fall short, leaving your family in a serious financial lurch that life insurance may be able to help them avoid.
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