Why Do You Have Life Insurance?
By Peter T. Waldron
Manager of Trailblazer Wealth
It’s safe to say that no one ever wants to think about losing a loved one. The fact that I must think about it every day both desensitizes me to the thought while also making me keenly aware of its impact. With life insurance, however, the impact of loss can be limited to emotional and not financial, if done properly. But why do we have life insurance? Let’s explore why people buy life insurance and when it’s a good time to let go of the policy.
Many people buy their first insurance policy around the time they have their first child (because that’s what adults do, right?) Others buy it because their college friend is an insurance agent or because they’ve gone through a loss and realize that they too need to consider the end and how life will be once they are gone. Another reality is that many folks have it as coverage through work. But the truth is, no matter how they come by their life insurance, many people buy it without any consideration for proper planning, even though the consequences of poor planning can be catastrophic.
With a proper financial plan, you can establish a level of certainty that the amounts of life insurance you have are sufficient. While owning life insurance is a great first step, with planning you will peel back the onion of your financial life, unearthing your wealth and the objectives you have planned for your future. The concept of planning around a premature death can be either oversimplified or made to be overcomplicated (not that these other methods aren’t relevant). We have found that the easiest way to make a determination is to subtract your objectives (standard of living/mortgage/college/vacation home) from your resources (income/assets). If the result is a deficit, you need life insurance, and if the result is a surplus, you don’t. In the event there is a premature death, if that deficit is still present, then your survivors will not have the funds they need to support their objectives, and, conversely, if the surplus still exists, then your survivors will just have more, which is most often not a bad thing.
The idea of adulting is rarely fun with all the responsibility that it entails. And making awkward decisions about life insurance isn’t always top of mind. After all, who really wants to think about death? But as we have illustrated above, proper planning is necessary so that you can objectively assess your situation and ensure that your loved ones are taken care of financially if something happens to you prematurely.
Schedule a complimentary review of your situation https://www.trailblazerwealth.com/contact-us