What is Life Insurance?
Life insurance is there to protect your income and wealth.Life insurance is there to protect your income and wealth. It is a critical part of any personal finance strategy as it protects the individual (or insured) from any unexpected events. Life insurance comes in two flavors: term and permanent. Both types offer the insured a death benefit, but the permanent life insurance offers a cash value portion.
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Why is it that we pay insurance for our cars?
Why is it that we pay insurance for our homes?
But, we get squeamish when we pay insurance for our life?
You probably had or know someone who had a life insurance agent try to sell you or them life insurance. Some of them even knock door to door. I remember when I was a kid; there were door to door life insurance salesmen and one of them succeeded with my mom I think, because my mom has life insurance.
You might think life insurance is a scam because anybody that knocks on your door is selling you a scam or something you don’t need. That’s our automatic response to door-to-door salesmen these days.
You think that life insurance is a scam and I don’t blame you!
But, I guess the apple doesn’t fall too far from the tree, because like my mother, I have life insurance now too.
How did I end up with life insurance?
After talking to my financial advisor, I realized that I’m an ASSET (YOU ARE TOO).
I’m a software engineer and I was making bank at around $75,000 USD per year.
Because you are an asset, you have to put some value in your life. We have to put a number on it. Sounds horrible, I know, but we just have to do this for you and your loved ones.
In case something happens to you (i.e. you die), somebody is going to benefit, whether it be your mom, dad, brother, sister, wife, husband, or kids.
You’re thinking, “Donald is trying to sell me life insurance…”
Maybe I am, or maybe 10 years down the road when something happens to you, you’ll be thinking, “I’m really thankful Donald convinced me to get some life insurance to protect myself.”
Step #2: PROTECTION – What is Life Insurance?
Life insurance is there to protect your income and wealth.
What is Life Insurance Example #1
You have a family of four.
You have an accident. You have 0 Life Insurance. You DIE.
Who’s going to take care of your husband/wife AND kids.
And remember, on top of taking care of them, they have to pay your funeral expenses.
YOU HAVE 0 LIFE INSURANCE.
What’s in your joint bank account, they will burn through in 3 months.
What’s going to happen after 3 months? They’ll run out of money and will be out on the streets.
Will you be happy looking from heaven (or hell) thinking you could’ve done better for them?
What is Life Insurance Example #2
You have a family of four.
You have an accident. You don’t die. You end up in the hospital for 7 months. You have no protection.
Is your job going to take care of your family?
… Nope. They’ll fire you because you’re not making them money anymore. YOU’RE REPLACEABLE.
Sure you have a job, I have a job right now. I’m making money for them by working a 9-5. But, what happens when you can’t perform anymore? What happens when you can’t perform as well as you did before?
They fire you.
Unless you run your own business, but even so, if you’re the main point of contact and the most important person in your own business and it can’t run without you…
Once you fall, it will ALL fall.
That’s why we’re talking about protection right now.
Let’s say it won’t be 7 months, let’s say it’ll be one or two years or you’re paralyzed.
Let’s say you’re pooping your pants and you have to wear diapers.
You need long-term care; someone has to be taking care of you all the time.
You’re wife or husband needs to work to bring in the money to raise the kids.
Then, who’s going to come in and take care of you? To help you dress? To help you pull up your pants, help you shower, or wipe your butt?
You might be thinking it’ll never happen, UNTIL IT DOES.
What is Life Insurance Example #3
You have no family of your own.
You have an accident and die.
Do you want to die LEAVING your parents NOTHING?
ALL THE MONEY THEY SPENT RAISING YOU?
All you want to leave them are tears and depression? Really?
The cost to raise a child from birth to 18 years old is around $200,000 – $250,000.
Your parents don’t expect you to die before them and when you die and you have no money, THEY’LL HAVE TO PAY FOR FUNERAL EXPENSES.
After raising you and spending $250K, which brought them a lot of joy, investing so many years into raising you, and then having you go before them, I think that’s really heartbreaking.
All that you’ll leave your loved ones are depression and tears.
If you go without
A Riddle To Leave You With
Do you know ONE thing that you can NOT buy?
When you need it and want it most?
No matter how much you offer?