Rethink Your Approach: Prioritizing the Importance of Life Insurance

Consumers often focus on insuring their cars and homes rather than themselves, mainly due to their lack of awareness of the importance of personal insurance. They tend to underestimate the potential costs of health or life risks, leading to the false belief that such coverage isn't needed. Furthermore, societal norms and beliefs about invincibility can also cause people to hesitate to invest in personal insurance, even though it safeguards their most valuable assets—themselves.

Unfortunately, most people view life insurance as just another financial expense, comparable to home, auto, and health insurance. These types of insurance have premiums that can go up, and there’s always a chance of being denied coverage. Additionally, premiums paid might be lost if the policy isn't used. While these are expenses—though often necessary—they are still costs. In contrast, permanent life insurance acts as an asset that protects your Human Life Value (HLV) through a death benefit. It is considered a financial asset mainly because of its cash value. This type of insurance is tied to a cash value account, which grows over time and can earn tax-deferred interest or dividends, depending on the policy's structure.

We have no problem paying high insurance rates for cars and homes when our most valuable financial asset is ourselves.

Additionally, you can access the accumulated cash value in multiple ways while you're still alive by taking out loans against the cash value, using it as collateral. These loans usually don't require credit checks and often offer flexible repayment options. This can serve as a potential source of funds for various financial goals, such as retirement income, college expenses, or emergencies. Essentially, the cash value of a permanent life insurance policy makes it a financial asset that provides both a death benefit and liquidity during your lifetime.

Regarding a permanent whole life insurance contract, I am unaware of any other contract that guarantees cash value growth, a death benefit, and level premiums for life, all of which are contractually guaranteed not to increase premiums or lose your cash value, regardless of stock market performance. A somewhat similar situation is your home mortgage. Yes, typically a mortgage has a fixed rate, and you can think of the equity as the cash value and the appraisal as the death benefit; however, neither of these is guaranteed, and both are affected by market fluctuations.

We have no problem paying high insurance rates for cars and homes when our most valuable financial asset is ourselves. A person's life has an economic value based on their ability to earn income and support their household financially. Life insurance not only protects this economic value but also offers living benefits to help cover unexpected financial burdens that could threaten financial stability.

Human Life Value (HLV) is a financial concept that indicates the monetary worth of a human life, mainly used in life insurance and financial planning. It calculates the current value of future income and benefits that a person would have contributed to their family or dependents if they were alive. Essentially, it helps determine the right amount of life insurance coverage needed to protect a family from financial hardship if the insured person passes away. It reflects the present value of your loved ones' future financial needs and considers factors like your future income, expenses, investments, savings, loans, and other liabilities.

A Human Life Value calculator is a great way to start resetting your life insurance mindset. Below is a link to a simple 'Human Life Value Calculator'.

Life Happens - Human Life Value (HLV) Calculator

That said, I strongly recommend a permanent whole life insurance policy for lifelong coverage. Along with low-cost term insurance during those critical working years and raising children, it not only provides an additional death benefit but also allows access to emergency cash, health benefits later in life, and can act as a retirement supplement to your existing plans.