As promised, this time around I will expound on the purpose of life insurance today. Oh how exciting!!
As a financial educator, I find that most people have misconceptions about life insurance and how it works, and it’s purpose so today we’ll hit on a few of those things. Before we dive into life insurance in particular, let’s talk about general insurance, like your car insurance, health insurance, and dental insurance; how do they work and why do people flip out about having “benefits”? Insurance is to protect something, right? For example, let’s talk car insurance, you pay a monthly bill and if anything happens to your car during that time, the car insurance company will cover it, depending on your coverage. However, if you don’t pay your monthly bill and something happens to your car, who’s on the hook for that? YOU ARE!! Same thing with health and dental insurance. All in all, you’re protecting your car, your health, and your dental health in these scenarios.
On the other hand, life insurance works the exact same way but it’s the wording that confuses us, because you can’t really protect a life can you? You can’t raise someone from the grave, although we wish we could in some cases; so what are you protecting with life insurance? You’re protecting your dependents/family’s financial future, God forbid they have to live on without you. Still don’t get it? Take a look at this:
In the early years, you may need a lot of life insurance coverage, because you may have young children who depend on your income, you may have debt that is cosigned by loved ones, and you may have a mortgage for your home where your family lives, so the loss of an income would be absolutely devastating! And let’s face it, most households in our country need both incomes of both spouses coming in for everything to function properly. This is the main purpose of life insurance; to replace your income.
Let’s face it, if you’re here you probably want to know how life insurance impacts your financial future and goals, right? Well, life insurance is the foundation of a sound game plan. I’d like to believe we all want to get out of debt and save money because that equates to freedom in a sense. And the beginning of the road to financial freedom starts with protecting our income.
This small illustration is what I live by. I know that you have goals and dreams, and so do I, and in most cases we need money to accomplish those goals. So before we even start saving and investing to get there quickly, we’ve got to protect the one thing that fuels our entire game plan and that’s our income.
If you have any other questions on life insurance, please feel free to reach out and I’ll help out in any way that I can. We’ll continue to talk about all the different reasons why you’ll want life insurance, and how it can be a strategic platform to ensure financial success for your family.
Until next time, don’t only gain knowledge from YouthfulWealth but implement it!