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  • Harry N. Stout

The Key Risks Life Insurance Protects You Against



To be successful in your lifetime journey in the FinancialVerse, you must explicitly consider the financial risks you will face and how you can eliminate or mitigate each. These risks are real, can be easily understood, and will seem second nature to you, but they must be addressed. Most people, however, do not take time from their busy lives to objectively look at these risks until something unplanned and unfortunate happens around them. If you don’t take the time, you, your dependents, your family, or other significant people in your life may encounter major money detours, potholes, and challenges. This might include having to uproot and sell the family home and move upon a death, not attending college, and or experiencing a substantially reduced standard of living.


A key learning for you is to know there are ways risks can be identified and mitigated for your benefit. It just takes a little time and effort on your part. As you determine how to address each risk, you may find life insurance can be a very effective protection tool.


As we discussed in The Financial Verse – A Common Sense Approach for Your Money, there are certain key financial risks you face in life. Here are the risks that a life insurance policy with appropriate policy riders can protect against:

  • Disability is the risk of becoming physically or mentally disabled (including memory care issues such as being diagnosed with Alzheimer’s disease) and not able to continue to work or care for yourself. An event of disability can create medical bills, drastically lower incomes, and reduce savings for the future needs of your dependents.

  • Health is the risk of becoming ill and not having sufficient resources to pay for the cost of care. This risk includes providing for the cost of a critical illness such as cancer or funding long-term care in your later years. Healthcare costs, even with basic health insurance protection in place, can be the financial risk elephant in the room. Unpaid health bills are the major cause of bankruptcies in our country.

  • Premature death is the risk of dying too soon and not being able to earn the income and accumulate the assets necessary to support your needs or leave funds to provide for the future needs of your dependents. A famous Motown song by the Temptations had the lyric “Papa was a rollin’ stone / Wherever he laid his hat was his home / And when he died all he left us was alone.” Whether you’re a man or a woman, dying too soon and not leaving sufficient cash to provide for the future needs of your dependents is not what you want to do.

  • Longevity is the risk that you live a very long life and won’t have the cash income to pay your living expenses. Will you have sufficient cash income to compensate for inflation, higher expected living costs, and the additional needs of aging? This is a growing risk in our country as medical and technological advances enable us to live to much older ages. Simply put, it is the risk of running out of money in old age when you are unable to work.

Life insurance can be purchased and structured to protect against and mitigate the negative financial impacts of disability, unexpected health costs, premature death, and longevity. Today’s life insurance can provide the funds to address each risk with one product for one premium. That is what differentiates today’s life insurance products from yesterday’s. In later posts we will discuss how you can use life insurance to your benefit and its hidden tax benefits to protect against financial risks.


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