In the discussions around life insurance we commonly are asked: “I’m saving money. Do I really need life insurance?” Savings are important but your saving isn’t designed to do what life insurance does. Our reply? Save AND have (some level of) life insurance. Life insurance covers the unexpected. Let’s look at how and why they complement each other:
Savings – great for planned expenses. Emergency funds, vacations, home maintenance and everyday life are perfect for savings. You control how and when you use the money. Sometimes, however, savings can be fragile, as you could lose your job, a medical event arises, a major repair comes along and suddenly your savings are reduced or depleted in spite of years of careful planning. And if a household loses a primary source of income, savings can run out very quickly.
Life Insurance – designed for unplanned loss. Life insurance provides a guaranteed tax-free lump sum of cash at the exact time a family needs it most. It turns an unmanageable and unplanned scenario into a more manageable one. Instead of tapping savings accounts or liquidating investments, your beneficiaries receive funds to stabilize and rebuild their lives while covering immediate bills, keeping up a mortgage and even preserving college or retirement plans.
Math Matters – replacement vs. accumulation. Savings accumulate over time. Life insurance replaces income and erases certain risks right away. Think about this: If your household relies on $100,000 of annual income, a policy at 10 times that income (i.e., $1M) can preserve multiple years of living expenses, large debts and future goals. And term insurance doesn’t cost that much either. Let us quote you. Most people are surprised at how little it costs for life insurance for larger amounts of coverage. Financial planners recommend having at least 2-3 years’ worth of income wrapped up in a life insurance policy. We recommend the same.
Liquidity without Timing Risk. Life insurance proceeds arrive when needed regardless of market conditions. Savings and investments rely on the market, and if you or loved ones are forced to sell assets when the market is down, the proceeds are less. Insurance proceeds avoid that timing risk giving your family breathing room to make better decisions later.
Affordability. Term life insurance is typically very affordable allowing you to secure larger amounts (if needed) for small monthly or annual premiums. As your personal “net worth” grows, you can layer or “ladder” additional life insurance policies.
Bottom Line: savings and life insurance go hand-in-hand and work together. Savings handle what you can predict. Life insurance protects against what you can’t predict.
Feel free to call us at 720-335-6872 and we can discuss your biggest financial concerns and help design a life insurance coverage that matches your budget and personal goals. Sherico or Steve are glad to help you with this.
