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Why do people buy Life Insurance?


Let’s start with an example; meet Bill and his wife Nicole, they are both in their mid thirties, married with 3 children aged 6 to 10 years old. Bill is employed at the local feed mill as a driver and makes $45,000 per year. Nicole works as a part time dental assistant and makes $20,000 per year. They have a mortgage on their home for $195,000 and also owe $15,000 on their 2 vehicles. They are managing things well.

Bill has some group life insurance at work for a flat amount Why Buy Life Insurance?of $25,000. Nicole has no group benefits as she is part time and works less than 20 hours per week. Their mortgage is covered by a group plan at the bank should Bill or Nicole pass away before their mortgage does.

Bill and Nicole are concerned that if either one of them passes away especially if the kids are under age 21, will they be able to carry on financially? They arrange to meet with Jacob, a Life Insurance broker. Jacob is a very easy going person. He reviews their financial situation, taking into account their incomes, their debts and family desires should Bill and Nicole pass away prematurely.

Jacob suggests Bill needs $650,000 of life insurance ($450,000 to replace Bills’ income and $200,000 to cover the outstanding mortgage). For Nicole, he suggests she carry $450,000 of coverage ($250,000 to replace Nicole’s income and $200,000 to cover the outstanding mortgage).

The reason why Jacob suggests the extra mortgage coverage is the bank coverage works on a declining balance, the premiums remain the same, and the bank is the beneficiary not Bill or Nicole. Having the mortgage coverage added on to their personal life insurance allows choices and flexibility for Bill and Nicole and in most cases is less expensive.

Jacob shows Bill and Nicole 3 different ways using various types of life insurance to satisfy their coverage amounts. They decide on term life insurance, which is very affordable and allows them to change or lower coverage as they see fit.

Bill and Nicole now have a “financial safety net” in case one of them passes prematurely before the youngest child reaches 21 and beyond. The monthly premiums fit well within their budget. They purchased this coverage because they care for their family and want to provide financial stability in case something happens.

Life Insurance is not meant to replace a husband/father or wife/mother, it is meant to assist the family financially and carry on with dignity.

Romano Klomp is a Life and Disability insurance specialist with Josslin Insurance Brokers Ltd. Romano can be reached at 519-893-7008 or click here .