Do You Really Need Life Insurance?
Life Insurance is one of the topics that is particularly sensitive to me.
Why, you might ask? And that would be a very fair question.
Isn’t life insurance necessary?
Let me start by saying: There is no one-fit solution for everyone and that each individual’s circumstances should be viewed based on their own needs.
The need for Life Insurance should be reviewed for your own specific circumstances.
Let me share some examples that you would need to be adequately covered:
You have young children who would be seriously harmed if they lost not just you, but your income as well.
You have a spouse who is dependent on you and your income, and you would want to provide for the person’s needs if you are no longer around.
Your family would be at a hardship if they would need to take care of your final expenses.
You have outstanding debt that would need to be paid, even if you are not around.
You have a very large estate that would be taxable if you were to pass away and there are illiquid assets that may be difficult to sell, or the timing may not be right to sell in order to cover tax liabilities.
You may want to leave your heirs/beneficiaries with assets.
As an example, the Bible talks about protecting Widows and Orphans in multiple places:
Isaiah 1:17 NIV states:
“Learn to do right; seek justice. Defend the oppressed. Take up the cause of the fatherless; plead the case of the widow.”
I’ll extend these verses to include the motherless and the widower. All those who cannot care for themselves. God has a special place for them and we have a responsibility to care for them – including making adequate preparation for them if we are not around to care for them.
1 Timothy 5:7-8 NIV states:
“Give the people these instructions, so that no one may be open to blame. Anyone who does not provide for their relatives, and especially for their own household, has denied the faith and is worse than an unbeliever.”
That seems to be a harsh statement, right?
Let me clarify that this does not mean enabling behavior from relatives who are not making wise decisions with their own resources, and are expecting others to care for them as a result.
You see, God expects us to take care of “especially for [our] own household”.
Now that we see that life insurance is absolutely necessary for some instances, let me share with you the other side of this coin.
I have seen where individuals with no assets are sold an insurance product that they do not need and would have difficulty paying for over the long term, so they may pay for the first few years, then end up allowing it to lapse, and may lose a significant portion of the amount they have put in.
If you are single, do not need to/wish to leave any significant assets to anyone, and your financial assets can cover your final expenses, you may not need insurance protection – as you can “self-protect” for your final expenses.
If your children are grown, they are no longer reliant on your income, they have established themselves, and you have other assets, you should consider whether it’s still necessary to own life insurance.
If your assets are well under the estate taxable limit, but well over what you will need for the rest of your life, you should consider whether you need to own insurance.
It’s worth noting that you may have bought life insurance coverage for a specific need at one time, but the event(s) you were covering are behind you; you should consider what your options may be now..
As I mentioned, this is a very sensitive topic to me, and there are so many variations of how an insurance conversation can go that it is important to discuss your specific situation with someone who will be helping you to plan from a holistic perspective, and not just looking to make a quick commission.
To answer why this topic is so sensitive to me: I have seen individuals who have been improperly sold insurance that they do not need, or components of their policies not explained clearly and what the potential ramifications are, depending on circumstances and life changes.
One thing I’ve heard some say in meetings: “I wasn’t sure about this, but I was convinced I needed it”. If this is you, you should consider getting a second opinion. Reach out to one of our advisors here to review your situation.
The person you are engaging should be asking questions that incorporate other aspects of your financial life, to ensure that the right solutions are being planned for and your needs will be taken care of if you are no longer around. And, as I would always encourage, for you to review your needs periodically as life changes.
