Despite the fact that many know they need life insurance, nearly half of consumers do not have insurance, according to a 2021 LIMRA study. The most common reasons are that they think it is too expensive, they have other financial priorities, or they aren’t aware of what they need and what type to purchase. To help you overcome the hurdles and make decisions to shrink your life insurance coverage gaps, we’re sharing the top 10 reasons you need life insurance.

https://www.youtube.com/watch?v=vuKJznszXbE

So, if you have life insurance needs, doubts, interests, questions, or even fears, and you want straight-talk, no-nonsense answers… tune in now!

Table of contentsWhy Do People Need Insurance?How Much Life Insurance Do You Need?10 Reasons People Buy Life InsuranceThe Benefits Outweigh the CostsIncome ProtectionPeace of MindTax Advantages to Grow Wealth FasterAdditional Retirement Income StrategiesAutomatic SavingsExcellent, Efficient Cash StorageAbility to Capitalize on OpportunitiesVelocity of MoneyGenerational WealthLinks for Further ReadingBook A Strategy Call

Why Do People Need Insurance?

[1:50] “I really just think it comes down to [the fact that] people do not want to face their own mortality. I think I said this once before on a podcast—we all know we’re going to die, we just don’t believe we’re going to die.”

It’s almost an evolutionary development because if we were constantly obsessing over our mortality, the world would be a much different place. Even so, people think about their deaths the more they have to protect: families, estates, etc. Life insurance is the product that protects your family and estate if you die. Knowing that that protection is in place, you can sleep easier at night knowing that what matters to you will be taken care of no matter what. 

How Much Life Insurance Do You Need?

Unfortunately, many families in the US are underinsured. Life insurance is perhaps one of the only insurance categories where this can happen. You can’t underinsure your car or your house, nor would you want to. Yet people underinsure themselves all the time. 

One way this happens is because many people calculate their insurance by using a “needs analysis.” In other words they count out how much money they’d need to pay off their home, car, and other debt if they passed away. Sometimes they include the cost of their children’s education. However, this doesn’t account for any income. While this is of course a better approach than having no insurance, there’s an even more effective way.

It’s called the human life value approach, or HLV. This is a way of calculating all the income you’d earn over your working years so that your insurance can act as a full income replacement. So if you’re 30, you may multiply your annual income by 30 to get your HLV. If you’re 50, you’d multiply it by about 10 or 20, depending. 

While this number seems shocking to many people, it’s realistic. Insurance companies won’t overinsure you, and they calculate HLV to determine the maximum amount of insurance you are entitled to. Many people don’t start out with enough liquidity to pay the premiums for their full HLV. However, just by knowing what that number is, you can feel more confident in the amount of insurance you do choose to purchase. 

10 Reasons People Buy Life Insurance

We don’t want to tell you what you “need,” because everyone has different circumstances. However, what we can do is share with you why people buy life insurance, and why they keep it. Hopefully, these can help you decide for yourself whether life insurance will be a benefit to you.

The Benefits Outweigh the Costs

[17:10] “Instead of painting in your mind ‘It’s too expensive, I can’t do it,’ just check it out first. And then figure out if it’s too expensive.”

The problem with “too expensive” is that it means something different to different people. For some, it may mean that they can’t fit it into their monthly expenses.