“Only a crisis – actual or perceived – produces a real change”. I believe this quote by Milton Friedman sums up many people’s attitude towards taking out insurance on their lives. I have known a number of people that did not want life insurance, until one day, without explanation, they come to me wanting to get cover as soon as possible. What has produced this change in attitude?

 

More importantly, why did it take a crisis to make them act?

There are a few reasons why people don’t take out life insurance – it’s too expensive, lack of trust in insurance companies or advisors, complexity, too many forms and questions, the need to disclose medical details.

I believe all of these are just excuses used to cover up the real issue.

So what is the real issue? I believe it is people struggling to accept their own self-worth by associating the amount of insurance cover to their perceived value.

 

Attaching a value to possessions like your home and contents, car, boat and caravan is fine as the insurance for these items is trying to replace their value. Even with a buy/sell arrangement for business, the insurance is a funding mechanism for the value of the business, which can be relatively easily determined.

However, trying to associate the amount of insurance cover to how much you are worth as person is complete rubbish.

You can’t value your life like it is some material possession as there is so much more value you provide as a person that can’t have a dollar figure attached to it. Forget the notion that the level of life insurance is what you are worth and begin seeing this amount of cover for what it really is.

 

I am sure there are things you want to do in your life – travel, spend time with family, buy your dream home, reduce work. All of these need financial resources and your ability to generate income allows you to work towards achieving these. Life insurance is to cover the gap between your current level of financial resources and the level needed to continue meeting your needs.

If you are struggling with the level of cover, you should review what you are trying to achieve – not what you think you are worth.