Life insurance is like the proverbial red-headed stepchild, or as Rodney Dangerfield used to say, “I don’t get no respect”. It’s just that way, nobody wants to buy it because it’s a big expense. We are required to buy auto insurance, homeowner’s insurance, and health insurance, but it’s not mandatory for us to carry life insurance, so it seems like a wasted expense.
While it’s not easy being poor, in some ways it’s simpler since you don’t have many assets to protect or worry about. All right, let’s get real for a second, because we’re not poor. We have assets and, in particular, we want to protect those assets from a variety of unfortunate things that might happen to them. Let’s walk through a few scenarios.
As advisors, one of the toughest things we have to deal with is a client calling to tell us that his or her spouse has died. It’s especially tough when the spouse is young. We ask tentatively, “Did they have insurance?” All too often the answer is “No.” The person has left a spouse with two small children. It’s hard enough on two-income families, but devastating if the person had been the family’s main income earner. Without life insurance, the family could be thrown out on the street.
A few years ago, one of my close family members was involved in a protracted lawsuit that resulted from a car accident. Fortunately, my relatives had good trust documents in place. Their assets and IRAs were titled appropriately, so the party trying to sue them got very little money when the case was finally resolved.
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