Life Insurance Has Evolved into a Powerful Product for Protection, Income and Estate Planning

The Basic Functions of Life Insurance

Most people have some kind of debt. Your home mortgage is debt. Your auto loans are debt. Your student loans are debt. Many in the middle have significant credit card debt. The American household just seems to run on debt. So all debts are financial liabilities. Families have obligations, whether it’s college education, future weddings or a charity that depends on your contributions. Future obligations are also a financial liability.

Most households today run on two incomes. All debt, mortgages and future family dreams are built upon two incomes either DINKs (dual income no kids) or DIRKs (dual income raising kids.) So the American family’s finances are generally predicated on two incomes. When you have two breadwinners, the potential loss of one can be economically catastrophic. Could a family continue in its present lifestyle if one of the breadwinners was suddenly gone? Most families would suffer, not only the loss of a loved one and the immediate expense of medical bills and funeral costs, but the loss of their lifestyle as well.

The economic equation of two earner households requires financial protection that only life insurance can secure. You need to cover both breadwinners to protect the financial stability of the family. The defensive strategy here is to pay off debt, fund future obligations and charities. This doesn’t include replacing income. It’s just lowering the bottom-line of your budget. Pricing human capital into the equation is necessary but difficult in a low interest rate environment. Because of family debt, future obligations and income replacement, most American households are woefully under insured. It is the underinsured that walk amongst us that could undermine a society already burdened with taxes and future government pension obligations. Can a society take on the additional hardship of surviving dependents?  Life insurance is one of the great redemptive solutions to our economic health as a nation, and the reason why the government has granted tax advantages to life insurance. It’s simply in the best interests of country.