How Much Risk Can You Take?

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When it comes to financial investments, one of the big questions asked is, “What is your risk tolerance?” A financial advisor asks this to determine how best to invest your money so you aren’t always biting your nails.

When it comes to your life, the same question should be asked.

How much risk are you willing to take with your life?

According to LIMRA, the Life Insurance and Market Research Association,

“More than one third (35 percent) of all households would feel adverse financial impacts within one month if a primary wage earner died.”

And

“Among those with life insurance, about 1 in 5 say that they do not have enough.”

It takes one incident to make you kick yourself for not planning in advance for those dreaded “what ifs”, especially…

Death

This death can mean more than the loss of a loved one; it could also mean the loss of income or related scenarios. This one is tough because no one likes to think of death. Even worse, it’s unsettling to discuss the topic with family members. We tend to avoid the topic when we’re young and seemingly immortal, however, we have all heard of or experienced those untimely deaths. Here are some scenarios from my own circles:

• My daughter’s best friend died from an automobile accident at age 18
• My half-sister died from a drug overdose at age 33, leaving behind three children aged 13, 11, and 9.
• A business friend is currently dealing with ovarian cancer. She’s a 41 year old single mother of two young teens, is currently unable to work due to her illness and treatments.
• My partner suffered a workplace injury that affected his body slowly over a 3 year period. By the time he was disabled and unable to work, he had no workers’ compensation, no disability reimbursements, and no income.

It’s those rare yet unexpected events that throw our lives—and our finances—into turmoil. While we do everything we can to prepare for the worst, are we ever truly prepared? Life insurance is one of those options that perhaps isn’t forced upon us but can be a financial and emotional comfort.

Reasons to consider life insurance

Unexpected terminal illness: a terrifying scenario that no one wants to deal with. While we are living longer, healthier lives, terminal illness continues to strike as we age. A free option within a term policy, called Accelerated Death Benefit, helps to pay for medical treatments, pay off debt, or take time off work to get better. This scenario would have helped my business friend—if she had purchased this coverage.

Pay off mortgage or bills: my parents each had a life insurance policy in case something happened to one or the other while my brothers and I were minors. My parents were highly frugal and understood the value in covering this rare possibility. When we were older, my parents dropped their policy knowing they lost all that payment into it (which was the option they chose). Even though rare, it was a risk they still didn’t want to take. This scenario would have helped my half-sister cover care for her children and covering her mortgage and other bills rather than falling on the shoulders of her parents.

Burial and final expenses: burial is expensive—and emotionally traumatizing. Even more difficult is discussing this with your loved ones who rely on you for so many situations. If you are a caregiver (whether for a parent, a partner, or your own children or grandchildren), your money flow is likely already tight. Your death could place additional and unexpected financial burden on those who rely on you. This scenario would have helped the parents of the 18 year old. Rather than forming a Kickstarter fund to cover burial expenses, a policy would have covered the expenses during this highly emotional and difficult time.

Business protection: as many older employees, second act entrepreneurs, and those over 50 seek new employment, having business protection is a bonus provided by life insurance carriers. Along with this, a life insurance policy helps secure a loan or a partnership.

These are just a few real-life scenarios but the biggest obstacle to considering life insurance is the cost. LIMRA has also found that, “Consumers overestimate the cost of life insurance, especially younger generations; 44 percent of Millennials overestimate the cost at five times the actual amount.” (Spoiler alert: my mother shared with me they paid $51.19/month while my brothers and I were young; my husband and I paid $44.29/month).

So why do I write about life insurance today? Because in the last few weeks, it has come up more than once in my own circles. The common statement has been, “If I only knew…”

What this means for you

• Be sure to have the hard talks with family and your spouse.
• Let your beneficiaries know what policies you carry and where to find the information when needed. My mother was unaware that my father had a life insurance policy through his employer. She happened to find it when going through a neglected file cabinet ~2 years after his death. She almost threw away a $40K policy!
• Each person wants/needs different coverage and has different concerns. Exploring options with a company that represents dozens of companies and specializes with applicants over 50, is the best start toward that peace of mind.
• You don’t have to be “young” to purchase a life insurance policy.
• Buying life insurance after 50 is much easier than you think; not nearly as expensive and intimidating as you are led to believe.
• With the right company, you’ll find the policies that are the best fit for their specific health profile.
• Focus on a company that this type of insurance is their prime offering. Some standard insurances “bundle” packages and include life insurance as part of their offerings. However, they don’t specialize in this area. You’ll find the best, cost-effective policies through a company that represents dozens of life insurance companies.

Are you ready for the “what ifs”?

Kristen