That is the actual question posed to me by a potential client. It wasn’t the question he meant to ask, because my answer to him was “100%.” My philosophy professor told us that if you ask the wrong question, the answer doesn’t matter. And the potential client asked the wrong question.
The question he wanted to know the answer to was “what are the odds that I die within the next few years?”, to which the answer would have been “minimal.” Unless you defuse bombs for a living or have a terminal illness, “minimal” is always the answer, provided you are under age 80.
So if the odds of a particular individual dying in the short term are minimal, why would anyone buy life insurance? Well, what are the odds of a particular individual winning the powerball? “Minimal” may be an overstatement. “Infinitesimal” may be more accurate. Yet the same people who question why they should procure life insurance think nothing of playing the lottery.
As discussed in a previous issue, life insurance is normally bought out of love; the love of family primarily, but also of a thing (family business, for example) or of a cause. And even though the odds of an early death are minimal, love looks at those minimal odds and determines that even that is too great a chance to take.
Because despite the minimal odds, people still die before their time. By definition, half die before life expectancy. In my town, a couple (ages 54 & 46) was killed instantly when a tree fell on their car during Hurricane Sandy. Miraculously, two of their children in the back seat were relatively unscathed. What were the odds of that happening? Certainly much less than minimal, and yet now four orphans (ages 19, 17, 14 & 11) will have to face life without their parents.
I could cite scores of examples that I am personally familiar with, but there is no need to, as I’m sure that you have your own examples. Yes, the odds are minimal (otherwise, the insurance would be unaffordable), but unfortunately, everyday someone experiences those minimal odds.
Premature death causes a host of problems, only one of which is solved by life insurance. Life insurance can’t bring back the deceased (obviously) or ease the emotional pain associated with death, but it can solve the financial problems, which in turn, can possibly help to limit the severity of some of the other problems.
So make 2013 the year you get your affairs in order. Review your life insurance program and your will. If they don’t reflect current your wishes, update them. Few things you do could have such lasting significance.