One of the primary roles for every head of household is managing risk—and one of the critical tools for that role is insurance.  When we talk about risk to property, automobile insurance mandates come from the state and homeowner’s insurance gets included in mortgage payments—we don’t think about those coverages since they aren’t voluntary.  However, when it comes to personal risk management, we need to be proactive to protect loved ones.  What if the breadwinner in your family passed away?   The emotional cost is devasting and lack of financial security may develop into a horrible downward spiral for dependents.  An effective life insurance policy helps to ensure that your family has a solid financial foundation if you pass prematurely.

 

When deciding on the amount of coverage that you need, you’ll need to know your household basic living expenses, debt payments and other daily necessities.  At a minimum, we are trying to cover the basics of food, shelter and clothing for several years.  For most Americans, the lump sum to clear this low hurdle will be hundreds of thousands of dollars.  If the minimal amount is all that can be afforded due to cash flow, then that is the answer.

 

However, when we apply scrutiny to the hardships of life, very seldom do families “pick up and move on” after such a life-altering event.  First of all, perhaps the accident that took the life of one parent left other dependents physically disabled and in need of permanent therapy or facilities.  In the event the primary breadwinner is the survivor, he or she will soon learn that childcare will become a huge financial burden. To the extent that the surviving partner must now serve both roles, that partner will have limits to employment and time spent outside the family.

 

The logic of insurance is self-evident, but many households still end up underinsured if they have any protection at all.  Risk management requires constant consideration and proactive choices. Acquiring life insurance that doesn’t solve the basic financial need is similar to having a fire extinguisher that’s out of charge or a smoke detector with a dead battery.

 

Obtaining a policy now has several benefits.  The current premiums will typically be lower than the future premiums simply because you are younger and statistically less likely to die.  You probably know of someone who had a cancer scare or other severe illness in their 30s—they may not be economically insurable after that event.  However, if you already have life insurance, you remain covered, and you have preserved your insurability.

 

Life insurance is a tool for risk management to cover very real financial responsibilities.  You should consider treating it as involuntary just like home and auto insurance, and, hopefully, like the latter types, you never need it.

 

If you have any questions or would like more information, please do not hesitate to reach out to me and we can see if life insurance is a good option for you.

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