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Financial Planning
Oct 2022

Life Insurance

By Daniel Morones-Garcia (2022 Summer Intern)

Coming from a Hispanic household my family and friends don’t like talking about death. We feel like we are calling out to the grim reaper and tempting fate whenever we get on the topic of mortality. Even now, writing this blog post I feel as though the grim reaper is behind me watching me type away, and yet, I continue. Although the topic of one’s passing can be difficult, thinking about life insurance can ease the load of such a heavy topic by ensuring your dependents are financially cared for in the event of a catastrophe.

A common misconception of life insurance is that it is only for people who have debts to be paid, like a mortgage, auto loan, or credit cards. In reality, the value of life insurance extends beyond the debts we have, and it is important for all of us to keep an eye out for opportunities to better protect our loved ones.

Life Insurance Allows a Continuation of a Lifestyle

Recently, a family friend passed away. He was a hardworking provider, and now suddenly his wife and child find their financial lives upended. Beyond that, they must also face the challenges of preparing final arrangements for a loved one. He didn’t have life insurance.

We can identify the obvious need for financial assistance in paying for his burial services, maybe even to pay off personal debts, but what about the other financial obligations in his life? He was a hard worker, and part of his paycheck each pay period went to his and his wife’s retirement funds. Now that has stopped. How does one value their future contributions to a shared life? It may have been a personal obligation to plan for retirement, as opposed to a contractual and legal one, but it is an obligation nonetheless that remains unfunded with his passing, just like a debt.

Who You Leave the Benefit to is Not Set in Stone

Purchasing a life insurance policy doesn’t require that you lock in your beneficiaries permanently when you buy the policy. You can change them at any time to fit your needs. Let’s say a 28 year-old male just purchased a $100,000, 20-year term life insurance policy and named his mom and dad as primary beneficiaries with his sister as a contingent. Four years later, the now 32 year-old, has a wife and baby. With some easy paperwork, he can change his spouse to be the primary beneficiary and his child to be the contingent. He should also consider if the amount of insurance reflects the life changes he has experienced.

Risk Management is a Necessity, Not a Luxury

Everyone’s financial situation is different. Car payments, bills, utilities, groceries, rent, and the list of things we need to pay for each month goes on and on. How do we find room for one more bill? This is where we need to remember the difference between a necessity and a luxury.

I have a soft spot for infomercial gadgets that we see on TV or in Facebook ads. Most of the time they are not useful, but I enjoy them. Of course, they break a lot sooner than expected, which just means I can buy something new to replace it, right? It’s always more fun to buy something for ourselves than it is to pay bills. If we end up pitting one against the other, I know which one I’ll end up choosing. This is why we are all advised to pay bills first, and why we need to think of risk management as part of our monthly bills. Whether this means life insurance, utilities, or saving for our retirement, our future selves and beneficiaries will appreciate our decisions.

Conclusion

Perhaps we need to shift the discussion. Life insurance is not about death, it’s about the lives we leave behind. Why wait for a catastrophic event to happen? Why not take action now so your loved ones don’t have to deal with the burden of your absence? Talk to your financial advisor and insurance agent to understand what needs protecting, and how to protect it.

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