Should Life Insurance be called Death Insurance?


Michael Hunter

Last week I promised to discuss insurance products. Let’s start out by stating the obvious. Insurance is there to help out financially when the unexpected occurs. For example, we buy disability insurance to replace our paycheck if we are sick or hurt and unable to work. We buy critical illness insurance to provide cash for us to recover if we are diagnosed with a serious life-threatening condition. We buy life insurance just in case we live too long.

You may have read that last sentence and thought to yourself, “Michael, that’s not right, life insurance is for when you die!” You are not wrong, but if that was all that it was about, shouldn’t we have called it Death Insurance? Hear me out, we buy disability insurance if we get disabled, critical illness insurance if we are diagnosed with a critical illness, collision insurance if our car is in a collision, fire insurance to cover our home being destroyed by fire, shouldn’t it be death insurance for when we die?

If we take a brief look at the history of life insurance before term insurance was invented there was only whole life insurance. It was originally designed to provide a safe, secure vehicle where you could save for that rainy day. Because there will always be a rainy day, life happens. So, life insurance was designed to guarantee there was money there when you needed it. Henry Ford needed it to start Ford Motor Company when he couldn’t get a loan from the banks, Walt Disney did the same for Disneyland. More recently Deloris Christopher used money from her life insurance policy to start the Pampered Chef company. 12 years later she sold the company to Warren Buffet for millions!

Considering that one of the biggest fears of retirees is outliving their savings, I have a number of clients who are using their life insurance policies to ensure that they don’t have more life at the end of their money.

Other people had the foresight to know that their rainy day was coming at the end of their life. For example, Ted Rogers, the founder of Rogers Communication had over $100 million of insurance because at the end of his life the tax liability to his family and all his corporations was immense.

So, as you can see, life insurance can be used throughout your life to make sure you have money when you need it. It is a savings vehicle where you can be assured that the money will be there when you need it (unlike investment vehicles or gambling vehicles I discussed a few weeks ago which may be up or down in value when that rainy day comes). Whether you need it early in your life to start a business or near the end for peace of mind that there will be enough money throughout retirement, or at the end to cover your income tax liability or take care of your family when you aren’t around to, life insurance can be there for you.

Over the next few weeks, I will be discussing how to efficiently design your life insurance program. If you would like a personal, one on one consultation to discuss your unique situation, call 647-302-0151 to book a time to meet.