Broker Check

Life Insurance Decision-Making

September 02, 2021
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September is Life Insurance awareness month, so to be festive, here are a few quick observations on decision-making and life insurance.

1. The amount of life insurance is more important than the type of life insurance:

There are several kinds of life insurance, and typically, term life insurance is the kind of life insurance that fits best because the monthly cost is easiest on the budget. There are many controversies in choosing the right kind of life insurance, so before choosing the right kind of insurance, determine the right amount of life insurance. Most people don’t know where to begin in assessing how much life insurance to purchase. I suggest asking yourself a few questions first. Do you want your family to have the same lifestyle if you die, or do you think they could manage with downsizing their lifestyle? Are your assets already sufficient for the future? Have you considered what you want to accomplish in your life? You might also consider checking some needs analysis calculators. Here’s an easy one. Once you calculate the amount of life insurance you need, purchasing life insurance is an emotional task.

2. The amount of life insurance you decide to purchase is an emotional decision:

No matter how much insurance is offered, presented, or decided upon, the amount of life insurance chosen is almost always an emotional decision. It’s a decision that determines your family’s future – a future which does not include yourself. How your family will survive beyond your life always elicits emotions. Furthermore, the fact that life insurance is even being considered is an emotional gesture in and of itself. Whether a life insurance salesperson, a financial planner, or just a simple calculator in your group benefits enrollment helped you determine the amount of life insurance, there’s an emotional connection to why you’re purchasing or considering life insurance.

3. Income isn’t the only factor to consider when purchasing life insurance:

Many couples consist of a spouse who is the “bread winner” and a spouse who takes care of the household. With these types of relationships, I often hear them say that the nonworking spouse should not have any insurance because they don’t bring home any income. With life insurance, lost income is not the only thing being insured. There’s significant economic value in a homemaker. If a stay-at-home-spouse dies, is the working spouse going to go to work the next day? We’re all humans (not robots)! There’s a grieving period with a death of a spouse. There are medical bills often associated with a death. If the nonworking spouse was taking care of kids, will the working spouse automatically know the daycare and school routine and be able to immediately accommodate all schedules? Probably not! Don’t discount a partner who doesn’t work outside the home. He/she likely works harder inside the home than he/she would have to work a job outside the home. I know for me, taking care of kids is much more difficult than financial planning.