What is Life Insurance (2)
Life insurance, like any other financial product is a tool to assist you in accomplishing a specific goal (or goals). As such, it will assist the beneficiary when there is an economic loss, due to the death of the insured that extends well beyond just funeral or final medical expenses. The loss of future income, due to the death of a breadwinner can have a severe impact on the lifestyle of the surviving family members. Debt owed by the deceased may become due and payable as well as possible estate or inheritance taxes. Life insurance can create an immediate source of funds to enable the payment of these expenses and to provide a source of future income.
Benjamin Franklin helped found the insurance industry in the United States, in 1752, with the Philadelphia Contributionship for the Insurance of Houses from Loss by Fire. The current state insurance regulatory framework has its roots in the 19th century with New Hampshire appointing the first insurance commissioner in 1851. Insurance regulators’ responsibilities grew in scope and complexity as the industry evolved. Congress adopted the McCarran-Ferguson Act in 1945 to declare that states should regulate the business of insurance, and to affirm that the continued regulation of the insurance industry by the states was in the public’s best interest.
The purchasing of life insurance is an uncomfortable task for many people and the image of most life insurance advisors leave something to be desired with examples such as Bill Murray in “Groundhog Day” and Mel Brooks in “High Anxiety”. Typically, there is recognition of an obligation to protect one’s dependents from the financial hardship an untimely death may cause, however no one likes to think about the fact that they will die someday. This is another reason aside from the potential discomfort of dealing with a life insurance advisor that can make it easy to delay and put off the decision to purchase life insurance.
Keep in mind that as you go through this process that life insurance is not for you, it is for your survivors. Therefore, you typically will only have a need for life insurance when you are leaving behind someone or some entity that is dependent on your income.
“Any road will get you there as long as you don’t know where you’re going”-Socrates.
