When reading about life insurance online, it’s common to only deal with the final purchase decision, how much and what type. Those factors need to be treated unemotionally and factually. In the past three articles however we’ve examined what happens before you make the decision to purchase life insurance. We’ve contrasted two groups of very knowledgeable insurance purchasers and seen how their underlying bias and assumptions dictate their final insurance purchase.
The financial bloggers assumed that they needed income replacement during their income earning years while they have debt. Their further assumption is that their need or desire for insurance goes to 0 at some point in the future. That resulted in the purchase of term life insurance with the expectation of cancelling the insurance later in life.
The life insurance brokers all had some level of income replacement, but they all also had a sizeable permanent policy. Their underlying assumption is that they want some level of insurance coverage in the future. That assumption appears to be based on both their past personal experiences as well as what they’ve experienced in their business. The result of those two things is a high perceived value of life insurance, and an expectation that they don’t want their coverage to go to 0 at some point in the future.
Which one is right? Of course they both are absolutely correct. Which is why most of my clients do not have the same level of coverage that I have (most of my clients have term life insurance, like the financial bloggers). Nor do I think my clients should have the same coverage that I have. As long as you’ve examined why you want the insurance and then find the best and least expensive coverage for that need, then you’ve done the job right. In the end it doesn’t matter what everyone else has, only that you have the correct coverage for your circumstances.