10/16/2005

Advice from Nashville's leading Financial Aid Advisor Dave Ramsey

 
Dave Says
By Dave Ramsey
Author of:
Financial Peace and
The Total Money Makeover

"Mother has no insurance, how can I help her?"

Dear Dave,

My father passed away recently and in the process of handling his affairs my sister and I realized that my mother, who is in her 60s, doesn’t have any insurance. We want to provide her with some type of security so she won’t feel like she’s going to be a burden on us. Should we try to find an insurance policy for her?

Tony in Louisville, KY

Dear Tony,

You can do that, but it’s going to be expensive. You could get a quote on a burial policy, which is a small life insurance policy with around $20,000 worth of coverage. This would be enough just to take care of final expenses and such, but it’s probably going to cost you about $2,000 a year. The bottom line is that any insurance company is going to charge a lot for this, simply because the likelihood of death is a lot higher for a 60-year old than for a 30-year old. 

But let’s think about it. If you’re going to be paying out $2,000 a year you’d be better off putting that money into a mutual fund. It would be a kind of self-insurance for funeral expenses, and it would take only 10 years to get $20,000 together, not counting the interest. But there’s a timing issue involved here, too. She’s been through a lot, man. Take your time, be very gentle about all this and just be with her for a while. I’m sorry you guys have to go through this.

- Dave

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