Life Insurance Dependency Explained

Raising a Family

The dependency period, in regards to life insurance, is the interval between the end of the readjustment period and that time when the youngest child's self-sufficiency, usually assumed to occur at age 18 (unless the child is mentally or physically disabled), is established. Minor children and other dependents may need to be supported perhaps for a lifetime or at least until they become self-supporting. The surviving spouse may need to be supported during this dependency period as well, instead of having to be forced to enter the labor market. Life insurance proceeds can potentially supplement other income sources that the survivors may receive. These sources of support available to the children, like other needs of the family, will affect the children's financial necessities.

Most people assume major responsibility for the support and maintenance of their dependent children during their lifetime, and consider it to be one of the rewarding experiences of life. However, the law does attach a legal obligation to the support of a spouse and children. If there is a divorce or a legal separation, the court will normally decree support payments for dependent children and even alimony for the dependent spouse. In some cases such payments, including alimony, are to continue beyond the provider's death if the children are still dependent or if the alimony recipient has not remarried. This is where life insurance comes into play.

In such an event, the parent and/or ex-spouse will be required to provide life insurance or set funds aside in a trust. Another group of family dependents that may have a period of dependency are the couple’s parents. The financial demands of providing parental support can be minimal, like providing room and board in the home and some basic necessities, for example. At the other end of the spectrum, support of a parent in an institution can be highly expensive. Payments to enhance someone's lifestyle, however, are not necessarily restricted to children or other family members. Payments are sometimes extended to lifelong domestic partners, helpers, and/or caregivers as an informal pension, perhaps for the recipient's remaining lifetime.

Life insurance can fund these payments if the benefactor dies first. It is a very important tool to leverage one’s financial stability against the expected and unexpected (death is expected, when it takes place is not). Have you taken the time to prepare? Have you taken the initiative to put a plan of action in place for your family? If you haven’t, please think about doing so. It could be the difference between an emotional and financially health or unhealthy dependency period for them.

About the author: Kyle McDonald holds FIC, FICF, FSCP® & CLTC designations. His viewpoint on life insurance is simple, “Anyone with a family must have life insurance. In the end, life insurance is for others you care about, not you.” He is ready to help you and your family get the best option available. Contact Kyle today at   1-800-651-1953 or KMcDonald@Pivot.com.