A Common BIG Life Insurance Misconception (094)

When my cousin casually mentioned he didn't have life insurance for his non-working spouse, it sparked an important conversation. This episode is a must for anyone that underestimates the economic value of a stay-at-home partner. 

Don't let the absence of a salary fool you into thinking there's an absence of value; we break down the cost of replacing those day-to-day tasks and why ensuring both partners are insured is a cornerstone of prudent financial planning. 

We discuss practical methods to calculate life insurance needs without overlooking the irreplaceable role of the partner at home. 

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If you or someone you care about could use the help of a financial advisor and sees the value in establishing a financial plan, please reach out to me.

Thanks for Listening!

Jonathan

Transcript

Speaker 1: 0:10

Hey, welcome back to the what the Wealth podcast. Today we're going to talk about a life insurance misconception. I see time and time again where we're talking about financial planning and the subject of life insurance comes up and we're trying to determine are you insured adequately? Do you have enough life insurance to cover you in case something should happen? And oftentimes I feel like people do not have enough life insurance. There's a couple of ways you can calculate if you have enough life insurance. There's the dime method. There's 10 or 20 times your salary method. There's a couple ways that you can do it. But today I want to talk about just a misconception that happens as you think about life insurance and making sure that your family is protected. I was actually talking to my cousin this week and we were talking about life insurance and he commented back and he said you know, my spouse doesn't need the life insurance because she's not working, she's not bringing assets or dollars into the household. Her responsibility is to take care of the house and to feed and care for our child and to run the errands to sports or swim or school or those sort of things. And so it just reminded me that there's a huge misconception when it comes to life insurance. So one of those is making sure you have adequate coverage If something tragically happens to you. We need to replace your income. We need to be able to provide salary and some assets for your surviving spouse to live with. We need to provide potentially, we need to provide for college. We might need to provide to pay off a mortgage. I mean, there's a lot that goes in here to unpack and again, there's ways to determine how much life insurance you need.

Speaker 1: 2:04

But unequivocally, the biggest misconception that I see is my stay-at-home mom or my stay-at-home husband, my stay-at-home spouse. Let's say that my stay-at-home spouse doesn't need life insurance because they're not working, they're not bringing in money into our household and so we don't need life insurance for them. That is a huge mistake and just not the right way to think about your personal financial plan. Let's think of it from another lens. If you are a working spouse, your job is to go out, work, your career, your small business, whatever you do to generate income to bring home and to support your family, and this is you know, whoever you know, whatever that role is in your family. And let's think of your spouse as having the opposite role. They are a stay-at-home parent and their job is to maintain the house. Their job is to get kids to and from extracurricular activities, to maybe go to the grocery store, maybe do laundry, maybe just maintain the house, and so they actually pay a vital role in your household. And just because they're not earning an income doesn't mean they're not worth anything. They're actually worth far more than you realize. And if you had to replace them because something tragically happened and you had to go hire that out, you had to hire a nanny to watch the kids and to pick them up from school and take them to piano or swim or baseball practice. You had to hire someone to do the laundry so you could get work done or cook or go to the grocery store, run errands for the household. All of that comes with a cost, and so you might find someone that can do all of it. You might find someone that can do some of it and you have to get someone else to do another part of it.

Speaker 1: 4:09

This is a real concern I have for people that just think I don't need life insurance, especially for younger people. Life insurance is very, very cheap if you get 20 or 30 year term policy for your family, for your significant other. I'm not saying you have to get the same amount for the stay at home parent as you would for the primary breadwinner, but don't discredit it and not get them anything. This is very, very, very important to your financial foundation as a family. In fact, I have seen, actually recently, clients who had passed away having no life insurance at all and now their family's left in a bind, and it's really, really important that you take that stressor off the table. So if something happens to you, they know they got to call Jonathan or there's a letter or there's a safe or a lockbox or something somewhere where they know they can go get the information they need. Don't leave them with extra anxiety because you decided that it wasn't worth getting $250,000 or $500,000 in life insurance. It's going to make your life easier if something happens to your significant other and if you're the primary breadwinner, make sure that your significant other doesn't have to worry about money. If something happens to you, get adequate life insurance. If you don't know how to calculate how much life insurance you need, raise your hand, reach out to a financial advisor. We're taking on new clients and we can help you navigate these exact questions and answers to determine what you need in a life insurance world.

Speaker 1: 5:48

We are not the type of firm that pitches everybody whole life or variable universal life. In fact, I use term products for clients. We keep it very, very simple and we do not believe in using insurance as an investment. You see a lot of that around. We get questions quite frequently around should I use Variable Universal Life or should I use cash balance or cash inside of a life insurance to create this bank on yourself type of system? I don't believe in that and I don't believe that's the right way you should accumulate wealth, nor do I believe that's the right way that you should be thinking about protecting your family.

Speaker 1: 6:30

I truly believe that term life insurance is the answer for this. You're just subsidizing via the insurance company, an agreement, for you know, if I give you a little bit of money every month or every year, you will take that risk off of me if something tragically happens to me or my spouse, and then they're going to give you that lump sum money tax free. So it is a core piece of your financial plan. It's a core piece of providing that comfort for you and your family. So don't look past it. It's very, very important and again we can help walk through a couple of different avenues of calculating what you should be thinking about, how much you should get, and helping facilitate that for you. But again I just wanna address, especially after talking to my cousin it's easy to, but it's something that comes up a lot and it's important to navigate this the correct way. So again, the misconception is that my significant other is a stay-at-home spouse.

Speaker 1: 7:34

We don't need life insurance for them. This is unequivocally false. You do need life insurance for them. If you have questions, reach out to me, jonathan at paradigmwpcom, out to me, jonathan at ParadigmWPcom, or you can also text or call us 865-251-0808. We are happy to help answer any kind of questions you have around life insurance, retirement planning, financial planning. All you have to do is raise your hand by sending us a text and we are happy to help navigate these challenges alongside you and take some of that pressure off of you. Be confident in your retirement. Have a wonderful day. Thanks for joining me on another episode of what the Wealth. If you enjoyed the episode today, smash that subscribe button. It helps me more than you think. Also, if you found this episode insightful and a light bulb went off, share it your friend, aunt Judy, the random guy in the office who's always talking about investments.

Speaker 1: 8:32

Wealth isn't about just the chain. It's about our choices, chances and changing our financial futures. The information in this podcast is informational, in general in nature and does not take into consideration the listener's personal circumstances. This podcast does not intend to be a substitute for specific financial, legal or tax advice. You should consult the approved qualified professional prior to making a final decision. Securities offered through LPL Financial member. Finra, sipc. Paradigm Wealth Partners is the other business name for Independent Advisor Alliance. Investment advice offered through Independent Advisor Alliance, a registered investment advisor. Independent Advisor Alliance and Paradigm offered through Independent Advisor Alliance, a registered investment advisor. Independent Advisor Alliance and Paradigm Wealth Partners are separate entities from LPL Financial.