Do you have insurance on your Baby Daddy? - Episode 66
In today's episode, we're chatting with our guest Acquania Escarne why parents should consider getting life insurance for each other, even if they're not living together anymore. It's all about making sure that if anything ever happens to one parent, the kids will still have financial support to help them grow up and maybe even go to college. It's a way to make sure your kids are okay, no matter what. We talked about how to figure out how much insurance you might need and how to go about setting it up.
About our guest:
Acquania is a financial coach, freelance writer, and independent life insurance producer with LifeTyme Financial Group, LLC. She is committed to helping people find financial freedom and build wealth. As a financial coach, she equips her clients with "outside the box" finance tips, debt payment plans, retirement planning, and more. With her advice clients are able to meet and exceed their financial and personal goals.
Her coaching is individually tailored to address all financial situations. Also, through her finance blog and podcast, The Purpose of Money, she shows women how to invest and save more so they can live a more fulfilling and prosperous life.
Acquania's passion for personal finance and investing began when she was in high school and her father gave her a copy of Rich Dad, Poor Dad by Robert Kiyosaki. At 16 years old, Acquania opened a Roth Individual Retirement Account and has been seeking financial independence and early retirement (FIRE) ever since.
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TRANSCRIPT:
Naseema: [00:00:00] What's up? My financially intentional people. We are joined once again with our favorite guests by our favorite guests. Hey, doing as well as
Acquania Escarne: Hey Nasima, how are you?
Naseema: but I brought this subject up to you. Because I was trying to be funny at first, but, but I think it's really important because of, we'll get into the context a little bit later, but I wonder how come this isn't talked about As much should we get life insurance on our baby daddies and our baby mamas? Like, why isn't this like a thing, right?
Like, why don't we hear this talked about often or your co parent? You
Acquania Escarne: No, I like it. Baby daddies, baby mamas.
Naseema: Exactly.
Acquania Escarne: sometimes just the sperm donor. Whatever you want to call it. Listen the other human who helps you create life. [00:01:00] Whatever you want to call it. My answer is always going to be baby. Absolutely. Just think about it. Nobody, unless you do artificial insemination and you are single and truly intend to raise a child alone, nobody makes a child alone, right?
And therefore nobody expects to care for a child alone. And the primary purpose of life insurance is to provide financially for your family, When you're not here, God forbid, the worst happens. You pass away. That is the income that keeps them going. That's how they maintain the lifestyle. You work so hard to give them.
So whether you are together or separated, you are parents. And I think that parents expect both parents to contribute to the livelihood of their children.
Naseema: And I don't know, like when I grew up and I probably told you about this like a long time ago when I first learned about life insurance, but growing up, you watch those movies and it's like, Oh, I got life insurance on that [00:02:00] person. And that means you have like a vendetta against them.
Like you have. Ill intent against that person because you want them to die. So you can collect this money.
Acquania Escarne: No, so that's where, Hollywood or even IDTV got people all wrong. First of all, there has to be an insurable interest right between a parent and the person who's the beneficiary of the policy so the having a child together definitely Secures the insurable interest because insurable interest basically means in the event of this person's death The person who's inheriting the policy will have a financial loss mental physical or like Huge impact because this person has passed away and minors are not meant to be beneficiaries of life insurance So when you are the parent of a child you have together It totally makes sense for you to make the other parent the beneficiary of the life insurance policy That'll care for your child that [00:03:00] you have together but know and trust and believe In the event of a random murder death suspicious activity, the cops are going to look into whether or not it was a life insurance policy involved.
They're going to look into whether or not the person who killed them is the person who inherited the life insurance. And I want to let everyone know for sure. Let me set the record straight. If you are found guilty for killing the person, you will not inherit the money. So it's a lose lose all around. So I don't encourage you to plot, get, go snap or anything like that because you will not get the money.
So it'll totally defeat the purpose. So just don't do it.
Naseema: like that. But like when we're thinking about replacing income. For something, if something were to happen for that other parent what are some things we should consider? Is there a minimum amount of policy we should look at what kind of policy [00:04:00] should it be? Should it be a term policy, a whole lot of policy, what are things we should consider?
Acquania Escarne: So let me start by giving you an easy calculation that most people can remember DIME, D-I-M-E, that's me You want to remember what's my debt? So debt is all of the people you owe money to student loans credit cards automobiles, right? But don't include your mortgage. And the reason I say that is because it comes later.
I is your income So I encourage people to remember Families to do 5 to 10 times your annual income so your family can live 5 to 10 years after your death You would have provided that income to them if you were alive Let's provide it if you're not and then m stands for mortgage. So that's normally the balance left on your mortgage I normally recommend this for partners who are married or living together and they want the other person to pay for it To be able to pay off the mortgage if they so choose after their death.
But obviously with baby mamas and baby daddies, you may not need to include that number. And then E stands for [00:05:00] education. So how much of an education do you want to provide to your child? If you want to do the full ride, I plan for a 50 K a year. So 200, 000 gets added to the number. If you're like, look, you need to get some scholarships, but I'll help you out.
Then you can do a hundred K and that helps the child out. But essentially you want to add up the D I M and the E and your total is what we would consider a nice healthy life insurance package, right? Some people, depending on where you live, that's a million dollars. Let's be real. I live in a high, high residential state.
In a city where houses are three 50 to 700 or more. So most of my life insurance is to cover the mortgage. Let's be real.
But then in addition to that, like I want my husband to be able to have my income. So that's where the five to 10 times comes in. So that's where you can start your discussion.
However, budget, [00:06:00] right? Okay. It all comes down to what can you actually afford? So if you need a million, but you're a smoking, unhealthy, older individual, it's going to be way more expensive than someone who's 25, doesn't smoke and is healthy. So you also need to consider what can I actually afford? I would go with what you can afford.
Cheapest most cost effective insurance is term. It gets a bad rap Sometimes depending on who you are listening to on social But it is the most cost effective way to insure your family at the cheapest cost And if you buy the right policy, I recommend a convertible term Then you can later get permanent insurance when your budget is ready for it, right?
But at least you won't have to undergo another medical exam and you'll be able to secure permanent insurance You within that term or time period you originally selected. So
those are my recommendations.
Naseema: okay, but when you're thinking about [00:07:00] insurance for somebody else, you don't have to go through the physical exam,
Acquania Escarne: No, no. So they do sometimes, right? It depends on the company. So I have some companies that are like, Hey, we looked up the person's medical record. They're not on any meds. They're not really having any medical issues. We can insure them without a medical exam. I have other companies they are cheaper, right?
If you're willing to take an exam and they can get full visibility on your blood pressure and your diabetes or whatever They're likely to insure you at a cheaper cost because they're not taking on the risk that you're hiding something They do that blood and urine and they know what they're getting into right?
So if the partner is willing if the co parent is willing get an exam get the cheapest cost because at the end of the day I've actually seen where sometimes the mom's paying for the dad Because the dad can't afford it or vice versa, right? And I don't think you should pay more for insurance than you absolutely have to so if you can get [00:08:00] covered And do the medical by all means Now, if you're someone who has medical issues and you don't necessarily want to take this exam then you can pay a little more and have no exam, but you're probably going to be limited to how much insurance you can get.
It might be just a death benefit to, to cover like 25 K or 50 K, but it is still better than zero. So
I recommend people look into that.
Naseema: do you have to get someone's consent to get insurance against them? For example, you, of course, obviously, if you need them to do a medical exam, they would have to consent to all of that, but in general, to get life insurance for someone else, do they have to consent to it?
Acquania Escarne: Yes, they have to know that the policy exists and that you are getting it for them. The reason why is because that's how people end up dead and on idtv because they got these policies They didn't tell the people and then they killed them for it, right? So there is [00:09:00] a consent. A lot of times they even have to sign even if they're not paying for it They have to know That you're securing life insurance on their behalf and that you're doing it so that the death benefit goes to you or to your child together if they're over 18.
So yes, we need to have adult conversations. We need to be up and up. I do not recommend you try to do this without the person knowing, because unfortunately that can lead to the life insurance agent going to jail and you going to jail too, especially if you do end up trying to kill these people.
So just don't do it, but that happened. There's some real cases. You remember that restaurant? I don't know if but like in Nashville, there was this case with a restaurant The owner's son killed the cousin for the life insurance policy. Then they found out that the cousin didn't even know he had a policy on his head.
And that's because he convinced the agent to do it without the consent of the insured. And then when it all came out, they all went to jail. [00:10:00] Okay. I'm not going to jail.
Okay. I'm not going to, I'm not going to jail for you. So let's just be honest. Let's have adult conversations. I also want to mention though, like sometimes this is the terms required for a divorce.
People don't think about that, but when you are, if you're going through a divorce and you feel like you need to make sure your child is taken care of, you can negotiate that in your divorce terms, especially negotiated if you're not getting significant child support or any other type of support from the other parent.
Put that on the table as a way to make sure that your child is okay. And I have definitely had clients who came to me and said, I need to get life insurance because it is a term of my divorce decree. And I need to be able to provide proof of this insurance by X, Y date. And that is important because That ensures that your child is taken care of a lot of times that policy doesn't have to be a permanent insurance.
It can be a term [00:11:00] it just has to cover depending on the agreement. You decide on your divorce. It could cover the child's adolescence. Early adult, right? So maybe a 20 year policy or a 30 year policy will accomplish that goal But I would argue it's just as important in the event of a divorce as it is in the event of co parenting
Naseema: Mm-Hmm. . Have you ever seen that come up, like with one of your clients where they say it's a condition of my child support that I have to get life insurance in
Acquania Escarne: No, that would be a new one. But I wish that was something course would do too, right?
Naseema: It makes sense to me. If you do have a order where the court is making you support this child in some kind of way, it should be in life and in death.
Acquania Escarne: Yeah, Yeah, I agree, but I have not had that yet I feel like the courts are still catching up on some stuff that makes sense And you don't need an agreement right to make a baby, but people do it all the [00:12:00] time They make babies and no agreements so I could see why we haven't Really implemented that as a requirement, but I like the idea.
How that could help a lot of people ensure that no matter what happens my kid is straight So
Naseema: What would that process look like? Say, okay I need to open up a policy. Like with my co parent how do we come to you? how to step by step? Like, how do we get that,
Acquania Escarne: yeah, so normally the first step is you come to me and say I need insurance on my baby daddy and If you can come to me with them on the phone even better if you don't I happily can write run quotes. I can run quotes all day every day But by the time we get to the let's apply stage baby. Daddy needs to be on the other end right whether i'd like to do a lot of zoom application, so I physically see the applicant get the license to verify that this is a real person and that they are electronically signing and they agree to what [00:13:00] we're doing.
So I would say, once we said, okay, this works, we're going to apply. Everyone needs to be present technically, you don't need to be present for the application because once they agree to get the policy. They can show up to me and fill it out on their own. You don't sign it anywhere But you do need to clarify beforehand that you will be the beneficiary so that part is clear and i'll make sure that's the case as well And then you need to know who's paying for it So i've actually seen both i've seen The mama say i'll pay for the daddy because I want to make sure that this gets paid and i've seen the parents say i'll pay for myself, let's list The other parent as the beneficiary and i'm okay with that It gets sticky when they don't get along like I ain't leaving her day sign.
I'm gonna leave it to my mama I've had that happen. I'm gonna leave it to my mama and my mama will make sure my baby's taken care of but I mean Something it's better than nothing in those cases. I'd be like, okay, whatever, whatever [00:14:00] Whatever works, right? But I have seen that i've i've seen parents be able to come together on this.
Yeah
Naseema: That's cool. That's cool. So the, honestly, the reason why I brought this up was because unfortunately, my oldest daughter's dad did pass away. And it was one of those things where I was like, wow, like, how come I didn't think about this? When she was born, like, how come I didn't consider this because I talk about money all the time.
Like, how come this didn't come up and I was like, man because nobody really talks about it. We talk about getting life insurance on ourselves and of course, I have adequate life insurance on myself, but, not saying that it would have been a good opportunity for my daughter. She's, she's not, she's, she's definitely missing her father and I'm more in that relationship loss for her.
However again, like it would have been a good [00:15:00] opportunity for her to have, like for him to leave something for her to look out for her, throughout the rest of her life. Now there are some. Other things that, that can cover kids in the event that their parents do die up to when they're still minors, a life insurance policy kind of transcends, all of those
Acquania Escarne: Yeah. Let's talk about those things though. So social security, I hope you applied. As long as her father worked in
the United States and contributed to the social security system. So you gotta work above the table. You gotta pay your social security taxes. Then that. Early demise of him would result in her getting income until age 18 because she's a minor
Naseema: Mm hmm.
Acquania Escarne: It depends on how much he made what that looks like because it is based on how much he put into the system Which is based on his income determines how much she gets out of the system But that's still money that if you [00:16:00] are sufficiently able to provide for your kids you can invest You can put in their college fund, you can set aside for them.
And then when they get old enough, say, Hey, your dad left this for you, even though it's social security. But I do agree with you. Like it's way better to be able to leave a six figure tax free check,
then,
a couple of coins every month, but anything is worth it. And I don't think everyone realizes about the social security.
I, unfortunately, one of my. clients who was 31 passed away, three kids and two baby mamas. And let me tell you, they don't realize Hey, y'all both need to apply. There's supposed to be money amongst all the children, not just the one who applies first. So sometimes you have to be proactive to make sure you get your benefit.
And the other parent has to be proactive too. Otherwise they might give all the benefits to one parent. The one who applied and not the other one who might be slow to [00:17:00] get on this train of knowledge, so just know that's a benefit that's for anyone who pays into social security. That is a benefit to your minor children, a
Naseema: To that extent, like when you say there's other children, other parents involved say one applied 1st, right? The benefits start as soon as they apply, but say that another, the other parent waited a year, they miss out on a year of those payments and you can't get that time back.
It's important to do right away after. The other parent has passed away. If you know that it's available for you. So yeah, you can't get those years back and it just lasts into, that child's 18. Something that you have to get on of course, you don't want to think about that kind of stuff in depth, but you have to be aware that's time sensitive.
Acquania Escarne: Yes, it is. No, it is not a
game because you know how some mamas could be like, Oh, I'm gonna get this before her and I'm gonna get my, and then you like, no social security. He got [00:18:00] three kids, not two, it's important. And I think that's where we go wrong is because we're like, Oh, I can't deal with this.
But you have to, if you can't deal with it, you need to appoint someone
Naseema: Somebody
else
Acquania Escarne: for you. Because it got to get done. That's your kid's money now. That's not even That's wrong. That's selfish, right? If you allow time to pass because you're mad at that person, you're angry at the situation or whatever it may be, just know that you're taking from your kid's mouth.
And that's something that as a parent, we are supposed to be selfless when it comes to our kids, not selfish. So please, please, please give them the benefits they are entitled to because they don't get it back. And that's the unfortunate situation.
Naseema: So in the event that you do have a life insurance policy on your child's father, your baby daddy, and they pass away, how do you typically do, like in general, how do life insurance benefits pay out? What
Acquania Escarne: Yes, that's a good question. So normally 1st, you contact the company and say, my baby daddy has [00:19:00] died. And then they say, okay, great. Fill out this paperwork. Who are you? Who were they? and where's the proof that they died? So the proof is normally in the death certificate. Most of the time that will require that you have a good relationship with whoever facilitated the funeral and final expenses.
Funeral homes if that was utilized will normally be the ones to request the death certificate and provide it to the family But you can always pay for additional copies of that certificate And that certificate is what you're going to use to put in your claim. You will need an original certificate They don't take photocopies.
They don't take scan copies They want an original death certificate and an original signature on the paperwork. So just know You need that and once it's in they verify right that the person has died in the circumstances In the event the person has died from a homicide and there's an ongoing investigation that does not mean you don't get the money That just means the insurance company is going to [00:20:00] do a little bit more Asking of questions before they pay out and a lot of times that's because by law Most insurance is not paid out if the person died in the event of transacting a crime.
Naseema: Mm hmm. Interesting. Mm
Acquania Escarne: uh, let's be careful who we wed and right. And who we get in bed with
because God forbid they are in the act of committing a crime, robbing a drugstore, robbing a bank and they die. The insurance company has discretion on whether or not they pay that claim. Now, a lot of them may still do it because it's the family who's suffering, right?
But if it's a criminal enterprise, there is probably not going to get paid out. Just know that that's like something that most companies will not pay out in the event of the individual committing a crime. So they ask detectives what was the context of this homicide? Was the person committing committing a crime normally when the answer is no, [00:21:00] innocent bystander, whatever, whatever, then they will cut that check.
Naseema: Typically, what is the turnaround time for cutting into for paying out life insurance? And then how is it typically paid out? Is it like a lump sum tax free? Or is
Acquania Escarne: absolutely lump sum, tax free, and as soon as possible. Most companies, good companies, a plus companies are expected to pay out within 30 days, right? But the death benefit has a no expiration date, right? So you can apply right away. They pay out as fast as they can say, 30 days or less. But if you didn't know someone had an insurance policy and you find it five, 10 years later, you still can put in a claim as long as you can prove the person died and they will pay it five, 10 years later.
Naseema: But you have to be the beneficiary
Acquania Escarne: have to be the beneficiary. Absolutely. Absolutely. You have to be the beneficiary you have to let them know the person died but a lot of times they figure I don't [00:22:00] want to say they figure it out because they do need to be notified They're not checking to see who died today, right? But A lot of times they will find out because the payments stop coming, right?
This person's bank account is no longer funding their assets because the family has closed the estate or whatever it may be. That is sometimes how they find out the person has died. But it is the responsibility of the family or the beneficiary to notify the insurance company.
Naseema: Okay. That's all good information. So I'm going to get life insurance on my baby daddy. How do we, how do I get in contact with you to
Acquania Escarne: Yeah, so check me out at the purpose of money. com, which is my website. You can book a free consultation. We can talk about your life insurance needs or follow me on Instagram at the purpose of money. I'm there talking about money, acting a fool sometimes and reels. And I talk about real estate and investing in all things too.
But I'd love to help. I do offer the free consultation [00:23:00] because sometimes you've got to talk these things out. And if I'm able to help you, I definitely will. So get that insurance on your baby daddy. I'll be here to help.
Naseema: Thank you so much. It's really, really good information, but I think these are conversations that need to be normalized because Like, why, why, why didn't I think about it? Why didn't I think
Acquania Escarne: Yeah, I'm sorry it happened to you, but now you can help others. I would have loved to have helped you before it was too late, but now we know and we
can do something about it.
Naseema: Now we know. Two more to go.
Acquania Escarne: Yeah. Lord.
Hey there I’m Naseema
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