Do I still need my life insurance?

Do I still need my life insurance?

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Mr. and Ms. Smith are the parents in a successful two income family with four children. They own a nice house near the city and are involved in many activities outside of home or work, mostly centered around their children.

Their first born is a 17-year-old daughter excelling in the sciences and looking forward to attending a private college on the west coast. Their second born, a 15-year-old son, is a highly competitive baseball player and may be on a scholarship track to a division one university. Next in line is their 13-year-old son who already performs in a garage band and mixes music on his computer for school dances and parties. The youngest is a precocious girl who loves being around her friends and family and shows a keen interest in medicine at the tender age of 10-years-old.

Mr. Smith owns a textile company with 25+ employees and earns approximately $250,000 a year. Ms. Smith is a structured finance attorney with a mid-sized law firm and also earns approximately $250,000 a year.

There are many reasons to buy life insurance but the four most popular reasons are:

1)           To financially protect your family;

2)           To replace lost income from the death of an income earner;

3)           To pay off debts and estate taxes; and

4)           To cover potential future expenses such as education, childcare, and funeral expenses.

The Smith family illustrates all four of these reasons. Although the amount of coverage varies by lifestyle, assets and income, the reasons for purchasing life insurance remain the same.

Mr. and Ms. Smith each own life insurance policies to make sure that the future expenses of  their children, including college, post college education, childcare and funeral expenses will be covered in the case of an untimely death of either one of them.

Each of the Smiths bought enough life insurance to make sure that any debts they have on their house, cars, credit cards or bank loans would be paid at the death of either one of them. As their assets accumulate during their earning years, they have also included an amount to cover any estate taxes that may be due at death.

The Smiths current lifestyle relies on the income of both Mr. and Ms. Smith. Their income is used for their daily needs such as food, clothing, housing, and medical bills as well as their desires for travel, summer camps, concert tickets and the like. The amount of life insurance coverage was calculated to make sure that the family is financially protected in the case of the death Mr. or Ms. Smith, or both of them.

There is over $20 Trillion of life insurance death benefit in force in the United States today. Yet statistics show that almost 90% of life insurance policies lapse without the life insurance company paying a death benefit claim. Why?

Well as the above example illustrates, as life changes needs change and the reasons for purchasing life insurance also change. As for the Smiths, when the children are grown, finished with college and secondary education and are on their own, the need to cover future expenses evaporates. At that point, the life insurance policies may no longer be needed to support their children.

As the Smiths pay down their mortgage, credit cards and bank loans, they may no longer need life insurance to help pay off debts. At some point, the Smiths may accumulate enough retirement savings and other assets that they no longer need to rely on life insurance to replace income for the surviving spouse.

However, the number one reason owners of life insurance allow their policies to lapse is the cost of insurance premiums as they age.

Insuring A Better World Fund provides an alternative for seniors which allows them to donate their unneeded life insurance policies to the charity of their choice at no cost to them or the charity. Insuring A Better World Fund does not have to change human behavior to be successful. There are Billions of dollars of life insurance owned by seniors that lapse every year. Together, we can prevent these policies from going to waste. Everyone leaves a legacy, and this is a unique opportunity to leave a legacy-sized gift at no cost to the donor/policy owner or the charity.

If you own life insurance that you no longer need, Insuring A Better World fund is a no cost exit strategy leading to your legacy.

If you are a financial professional, this is a new, no cost, charitable exit strategy for clients that are considering lapsing their life insurance policies.

If you are a charity, life insurance donations are a vast asset class with sizable potential for your donors to donate legacy-sized gifts, with no out-of-pocket or administrative costs to your charity.