What happens to the goals you have for the people you love if your income suddenly disappears due to unfortunate and unforeseen circumstances?
Life insurance is, quite possibly, the best concept ever created for the financial protection of one’s goals. Unfortunately, the verbiage surrounding the topic can sometimes be a bit confusing. There are many other names we could call life insurance to help people better understand it but, at the end of the day, the term life insurance could not be a better fit once you grasp its purpose.
Primarily, when it comes to protection, you must consider something to be of significant value in order to feel the need to protect it. Protecting one’s life, then, should be a given – what is more valuable than life itself? Sometimes though, we must dive deeper into things to fully understand their impact. It’s like the tip of the iceberg in the Titanic; there’s no way they could have predicted how catastrophic the outcome would be by only focusing on the tip of the iceberg. Sometimes, we need to think better and more deeply, and not just focus on the surface-level ideologies.
As such, another way to understand life insurance is by calling it income replacement. Most working-age adults will have some form of financial obligation to uphold – things like rent, phone bills, loan repayments for your car, etc. – which may fall into a category of low importance, but are still obligations. On a bigger scale we would look at something like your dependents. These could be your children, your spouse, your elderly parents, or anyone who may depend on you not only for your physical care but, more importantly, your financial income to continue to live the life you help provide.
Most people have goals and aspirations for their dependents and the thought of fulfilling these goals is often a driving force in their lives. But, what happens to the goals you have for the people you love if your income suddenly disappears due to unfortunate and unforeseen circumstances? Raising your children is the perfect example. You work hard to provide for them in the hope that they will live a full and rewarding life, possibly better than your own. This may include having the best education, or investments that give them a financial head start, but none of it happens without your breath of life. Living to see it all happening is one of the most rewarding things on this planet, but…what happens if you pass away, and your income suddenly stops? Who is going to foot the bill for your goals if you die suddenly? Would you still want everything you have been working toward to still take place if you’re no longer here? How is it even possible to make this happen?
Life insurance is the answer. The cost of everything you’re trying to achieve only happens if you live to fund it. If you were to die, life insurance replaces your income and funds everything you were trying to achieve while you were alive.
Another way to understand life insurance is by calling it debt protection – this is probably one of the easiest concepts to wrap your head around but it’s still income replacement or simply life insurance. One of the most common ways to illustrate this is by considering the purchase of a house. Many people place buying a house high on their bucket list and it’s no secret that acquiring a mortgage comes in the form of debt; as a substantial purchase, there’s usually no larger liability you can acquire in life.
The idea of paying off your mortgage is a beautiful thing and motivates most people to work hard for twenty-five to thirty years just to be able to own a home and pass it down to their children. The downside is that it is in fact a huge liability until it’s paid off. If you live to clear that debt, great, but if you don’t and your dependents are not in a position to keep up with the payments after you pass away, the loss of your income will prove to be catastrophic. That goal that you had while you were alive will die with you – and no-one purchases a home only for their children to have to sell it back to the bank if the worst happens.
If the mortgage lender said to you when you bought it that, for only a 2% increase on the price of the home, they would pay the mortgage off completely if you pass away before clearing the debt, it actually makes the goal less costly if you do die. In a similar fashion, life insurance works as a form of debt protection and, in my opinion, is the deal of a lifetime.
I read a quote recently in a book provided to me by an individual well-acquainted with the topic that said, “No-one cares about how much you know, until they know how much you care.” As a huge fan of this concept, I’ve made it my mission to ensure I do the best I can to get the depths of this information out there. Not just because it’s my job to do so, but because I do sincerely care about the future of my community and the impact this knowledge can have on empowering you to make better decisions, to see beyond the tip of the iceberg and dive deeper into the depths of understanding. It’s my goal to help you gain control of your future. Don’t be the, “If only I knew then what I know now!” person ten years from now. Right now, will always be the right time to take control.