Sitting at the island in the kitchen running some numbers on my laptop, my daughter asked if I had bought her insurance. I laughed and said bluntly, “No!” But you do, dad. Why don’t I have insurance? “Because if I die, you’ll go live with your mom and will need more money than she can provide. But if you die, I’ll actually have more disposable income.” She thought about that for a fraction of a second and then protested at the diss.
I explained to my daughter that in looking at her future financial security, a ladder structure for my coverage makes sense. So, as she ages, the less the payout she would need as big ticket items like education would already be paid for. She has no insurance (other than health), because the priority is for parental coverage since there are other and better investments for a child. And even if she had a life insurance policy with low premiums (based on risk and the likelihood of her death), the payout would be low to cover final expenses since the concept of income replacement is non-existent.
However, there could be reasons why families may consider a full or rider policy for a child. Guaranteed future insurability or building cash value are examples. There could also be family estate planning requirements and other structured financial instruments used in multigenerational estate planning.
If I die, you’ll go live with your mom and will need more money than she can provide. But if you die, I’ll actually have more disposable income.
But for the most part, most of the guys I know have usually less than they think they need. Almost always, they either buy too late (hence risks are higher as one age and therefore the premiums) or too little (payout would still leave a coverage gap). So, that’s why a ladder structure with multiple policies expiring on different terms with flexible coverage and payouts makes sense especially from an affordability perspective.
In reality, it’s disability insurance that is far more important. If I ever get injured to the point where I cannot work, life insurance won’t pay out as I’m still breathing. And arguably, depending on where I live and the type of injury I sustain, the ongoing bill could be astronomical!
“Alright, youngling, enough. Let me update my will.” Dad! Is there something I need to know? “Yes, I’m securing your financial future. Doesn’t your mom do this?” No, mom and I don’t talk about these things and I don’t know what she has. “How are you going to know anything if something happens?” She said nothing will happen. “OK, let’s live an aspirational life but I’d feel better if there’s a backup plan and that takes planning.”
Yes, this is where you and mom are different, my daughter said. “Yeah, come to think of it, if you mom has a policy, she should name me as the beneficiary.” That will never happen, dad. “Yes, but who do you think I’m going to spend that money on? Especially since you are a minor and the money can’t go to you.” Yeah, I don’t know. Did you name mom as your benefactor? “No, I have you aunts as executors who will dispense as required.”
Dad you’ve given your death a lot of thought. Are you sure there isn’t something I need to know? I raised the corner of my lip, shook my head and remembered a dad-joke I once heard. I pointed at her cello and asked, “What’s Mozart doing right now?” I dunno know. “He’s decomposing.”
