In break from my usual business and technical content, this is something I’ve thought of posting for a while. I think this may be useful to some in this unfortunate situation, and perhaps posting it publicly may help somebody else.
My wife passed away about 6 years ago. She was diagnosed with a Brain tumor about 8 years before that. This scenario obviously sucks. But I’ve learned some things that I think are worth sharing for others who are in that situation.
Life Insurance Options
You’ll probably be unable to get any traditional life insurance for obvious reasons.
Group Life Insurance through one of your employers
I owned a business at the time, and we had always offered Group Life Insurance to all employees. This type of insurance for employers is relatively inexpensive if they pay for it for all employees. It requires no questions of employees and everybody and their spouses are available. I want to say it cost something like $3/month per employee for $25,000 of coverage for the employee or spouse.
If you own a business with employees, this may be a way to get some life insurance when you are unable to otherwise. If you go through a broker, ask if they can provide group life insurance. If you work for a small business, maybe you could speak with the owner or whoever manages benefits to see if it something your company could offer.
Check if you can increase any existing policies
If you have any existing Life Insurance policies, check with your insurance agent if it has an option to add additional insurance. This is sometimes called an “Option to Purchase Additional Insurance”, or a “Future Purchase Option”. We had one policy that had an option every 5 years to add additional insurance without any questions asked.
Social Security Survivors Benefits for Children
The United States Social Security program has a survivor benefit available to minor children of a parent who dies. The benefit is calculation is complicated, but for my wife it was exactly 40% of her highest W2 wages. For example, if you make $60,000/year in some prior year, after you die, your surviving children will receive about $2,000/month ($24,000/year) until they reach 18 years old or graduate from high school. That amount is increased annually with inflation. This can add up to be a very significant amount!
If you have multiple children, when the first one becomes ineligible, by turning 18 or graduating from high school, the same total amount is split among the remaining minor children. We had four minor children, each one receiving about $500/month ($2,000/month total). When the oldest graduated High School, the remaining three each received about $670/month (still $2,000/month total).
Technically the children receive the payments, but the surviving parent is custodian of it and has to use it for the benefit of the children. If the children are living with the surviving parent, the Social Security Administration doesn’t require any documentation that the funds are being used for their shelter and food. Other circumstances probably require proof that the funds are used for approved purposes.
Calculation of the Survivor’s Benefit Amount
I’m unable to find any actual calculator or statement online that says exactly how the benefit amount is calculated. In my experience, it was based off the HIGHEST single year of W2 wages that my wife earned in the prior years. In her highest single year, she made $60,000, and the annual benefit for the surviving children started at $24,000/year ($2,000/month). This is different than Social Security Retirement benefits, which are based on a formula somehow averaging the highest 35 years.
I would love to see how others benefits are calculated, to confirm if it is based on the highest single year of earnings also. If so, it is to your childrens’ future benefit if you can work to earn as much as possible in a single calendar year. By way of example, if you can add $10,000 to your W2 wages, your children will receive and additional $4,000 per year until the youngest turns 18 years old. Perhaps you could work with your employer, customers, and others to focus on earnings for one calendar year.
Other Ideas
If you have any other questions or suggestions to share, feel free to comment below