173-Economic Basis of Life Insurance and Individual/Family Uses of Life Insurance

Radical Personal Finance

Joshua J. Sheats, MSFS, CFP, CLU, ChFC, CASL, RHU, REBC, CAP

Self-improvement, Business, Education, Investing

4.2 • 1.9K Ratings

🗓️ 1 April 2015

⏱️ 66 minutes

🔗️ Recording | iTunes | RSS

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Summary

At long last, we enter into the oft-requested topic of life insurance! Today's show is an introduction to the economic basis and justification for life insurance and it's also an outline of some of the uses of life insurance for individuals and families. (We'll cover business uses another day.)

You also get the joy of a bit of a sales pitch on why I love life insurance planning so much. It's truly an incredible financial product.

Life insurance is founded on the economic value that each of us provide to others and on our moral obligation to provide for our dependents.

Because each of us has an economic value that can be estimated, we can come up with some formulas to understand how much life insurance is appropriate.

The three major approaches to determining an appropriate amount of life insurance are:

Human life value approach
Needs analysis approach
Rule of thumb approach (most popular is the multiple of income approach)

The best of these methods is the needs analysis approach. It balances the need for precision and the need for simplicity quite effectively.

Life insurance can have many uses for individuals and families:

Immediate funds:
- Cash to meet daily living needs
- Cash to pay expenses associated with death
- Cash for emergencies, repairs, or replacements
Ongoing income:
- Spouse
- Children
- Parents
- Nondependents
Funds to pay debts
Funds for death taxes
Funds for dependents' education
Funds for trusts
Funds for charities
Funds for gifts
Funds to supplement retirement income
Funds for home health care or nursing home care
Funds to transfer assets to a younger generation
Funds to discreetly provide for confidential needs

Enjoy the show!

Joshua

Support Radical Personal Finance! http://radicalpersonalfinance.com/patron

Transcript

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0:00.0	Today I have a question for you. How much are you willing to pay for your education?
0:07.0	Answer the question in your mind. How much are you willing to pay for your education?
0:16.5	Now I don't know what you're willing to pay for your education but I learned years ago from
0:20.6	Brian Tracy that it's a good idea to invest about 10% of my income back into
0:25.8	myself, back into my education and I've done my best to do that although I've never
0:30.3	followed through all the time.
0:33.0	So, consider that, and consider this, as you listen to today's show.
0:40.0	How much is the education that you're about to receive worth to you?
0:45.0	There's no such thing as a free lunch in life.
0:49.0	You pay for things somehow, and there's no such thing as free education. But just ask yourself how much
0:57.0	is this education that you're about to receive worth. Today on the show we dig into a topic that has been much requested life
1:09.0	insurance but we're not going to get to immediately to what are Joshua's opinions on the term
1:14.2	insurance versus whole life insurance or what's the best type of equity indexed universal life
1:19.0	insurance policy for you to buy or to not buy. Rather, we're going to talk about the basic fundamentals
1:27.9	of why you should even consider having life insurance. Welcome to the Radical Personal Finance Podcast. My name is Joshua Sheets and I'm here as your guide and as your teacher and I'm
1:56.6	excited that we finally get to get into one of the topics that I most enjoy
2:01.6	working in which is life insurance. Now yes I'm a nerd, very few people
2:05.8	actually enjoy life insurance, but I do. And it's hard for me to think of a better
2:11.2	way to impact the world than with the topic of life insurance.
2:17.0	This is actually one of the most requested questions, most requested topics that I receive here via email and from listeners.
2:28.0	Everybody wants to talk about life insurance.
2:30.0	And we'll get another day into why that is because so much has been done wrong.
	...

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