What is Life Insurance?
What is Life Insurance?
The short answer is income replacement protection. But let’s dig in a bit deeper to see exactly what it means.
Its Real Purpose
Life Insurance is not a lottery ticket. It is simply meant to replace the income that is lost with the unexpected death of a loved one, so those left behind can continue to pay the bills, keep the house, pay for college, or secure their retirement.
Things You Don’t Plan On
There are lots of things in life you don’t plan on; the pinhole leak in the copper pipe when you’re heading out of town, the suit pants that don’t reach around your waist a half hour before an important interview, or the sudden downpour at your outdoor lakeside wedding. Life is unpredictable.
Dealing With the Unpredictable
While life is unpredictable, many problems can be avoided with proper planning. A regular check of the pipes could prevent an inconvenient leak, trying on the the pants a day before your interview might keep your job hopes alive, and a tent at the ready can keep your nuptials on schedule despite the unexpected weather.
A few preventative measures can keep life’s little surprises from turning your plans upside down.
However, even though a damp basement can be costly, smelly, and inconvenient if you fail to check the pipes regularly, it doesn’t come close to the challenges your family will face in case of your unexpected passing, especially if you don’t have adequate life insurance to provide for them after your death.
Surviving the Unexpected
You can always get another job interview, but your family can’t replace you when you die. A sufficient life insurance policy can attempt to replace the loss of income caused by your unanticipated death, but Americans as a whole are woefully underinsured.
Underinsured – The Statistics
According to a study by LIMRA in 2010, Americans were at a 50-year low in individual life insurance ownership, and 70% of U.S. households with minor children could not meet ordinary living expenses if the primary family income provider were to die. By LIMRA’s estimate, there is a $15.3 trillion shortfall in life insurance needs, which is the income that would need to be replaced if family income earners were to pass unexpectedly.
The Misconceptions of Cost
LIMRA found that 83% of people don’t buy insurance because of the high cost, but they also found that most people think insurance costs almost three times its true price. Most 30
Financial Life Raft
If your family relies on you for income, you should have a plan at the ready to keep them afloat in case of your unexpected death. Life insurance can be your family’s financial life raft, so make sure your policy offers sufficient coverage for their needs.
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