Why Do We Insure Our Cars for More Than Our Lives?
During financial planning meetings with my clients I always evaluate the protection portion of their financial world. That includes looking at their auto, home, life, medical and disability insurance. After looking over hundreds of auto insurance policies it is fair to say that most policies cover cars for replacement value. Meaning if you are in an accident and the insurance company says your car is totaled, they will cut the insured a check for the replacement value of that vehicle.
Why is it so important to insure a car for replacement value if it is wrecked? Easy, our cars are how we get from point A to point B. Most of the time that means from home to work and without a vehicle we can’t get to work and therefore our family loses our income. No income leads to bills not being paid, sacrifices being made in lifestyle and all-around financial destruction. Of course, if our car is out of commission we need to replace it for the sake of our family.
Then why is it that so few people insure themselves for “replacement value?” According to LIMRA* only 6 out of 10 Americans own some type of life insurance and even fewer have enough insurance to allow their family to continue their current lifestyle in the event of a premature death.
Replacement value is not a term that most would associate with purchasing a life insurance policy, but if we need to replace our cars in order to keep our family living their current lifestyle isn’t even more important to replace our income if we die? During our working years our families spend in one way or another every dollar that we make. That may be on today’s bills, putting money away for retirement, or putting food on the table and clothes on our back. None of these needs stop just because a breadwinner passes away and therefore every dollar we may earn in future needs to be protected by life insurance. In the insurance industry we call that Human Life Value. Human Life Value is the amount of life insurance a person would need to replace their future income from their remaining working years in the event of an untimely death. So, why do we insure our cars for 100% of their value, but not our lives?
If you want to know what your Human Life Value is and look at options for your life insurance then feel free to call me at (909) 307-4945 to set up a complimentary consultation.