Today’s Post is Brought to you by the Letter “L”

  • Oct-23-2015
  • Richard Reich

As the term life insurance begins with the letter “L,” I thought I’d give a nod to Sesame Street and take a look at L-words that are related to life insurance:

Love: This is the most obvious one, because it is the reason most folks purchase life insurance. Buying this type of insurance is often described as a selfless, caring act. Making sure your family will be financially protected in the event of your death is truly an act of love.

Loans: In many cases, making sure your debts (including the mortgage) would be paid in the event of your death would fall under the “Love” category above. However, there are other reasons one might purchase life insurance to cover loans. In some cases (e.g. business loans), the lending institution might require that a life insurance policy be purchased and assigned as collateral for the loan.

Learning: Again, this usually falls into the “Love” category, but it deserves separate mention. When younger couples purchase term life insurance, the calculation of the death benefit often includes college costs for their children. Additionally, the living benefits of a cash value life insurance policy (e.g., whole life insurance) are often accessed to pay for college tuition.

Legacy: Merriam Webster Dictionary defines Legacy as: Something (such as property or money) that is received from someone who has died or; something that happened in the past or that comes from someone in the past. I would say that either definition would apply to life insurance. The first definition is pretty clear-cut – you’re leaving money with the beneficiaries of your policy. The second definition has to do with how you want to be remembered. I would say that making sure your family can continue the lifestyle you created for them would be an excellent legacy.

Life: We are talking about life insurance, so let’s take a look at what you’re insuring when you buy a life insurance policy. Clearly, your life can’t be replaced, so any suggestions of life insurance as a replacement are purely economic – what you’re basically looking at replacing is your lifetime economic value to your dependents. In the insurance industry, it is often referred to as human replacement value, a term I’m not comfortable with. I doubt if we’ll ever see the product get renamed, but if it ever happens, my vote would be for “Income Insurance,” because that is exactly what is being insured in most cases.

So purchase Life insurance to leave a Legacy to those you Love, while perhaps paying off outstanding Loans and leaving the funds for your children’s Learning.

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