Consider the following examples and determine for yourself who needs life insurance coverages.
Tom and Jane are in their early twenties and have been dating for some time. Tom finally gets up enough courage to ask Jane to marry him. Upon his request she raises some concerns, i.e., where will we live, neither of us have a steady job, we both have a couple more years to finish our schooling, and our student loans will come due if we drop out of school. “I love you, Tom, but don’t you think we should wait a little longer? Besides, Mom and Dad will continue to pay for my expenses as long as I am single and going to school.”
Entrepreneurial Young Man
Hank has always been a very enterprising young man and, noticing how hard it is for his grandparents to get around, realizes the baby boomer generation presents a lucrative field for someone to take care of their homes and estates.
He devises a plan to franchise a handyman business where services could be established for yard work, household maintenance, storm repair, and minor carpentry repairs. This is going to take a huge upfront cash layout for purchasing
- service trucks with a company logo
- standard uniforms for franchisees
- carpentry equipment
- lawn mowers and accessories
- several strategically located seamless gutter machines
- advertisement blitze to roll out business opportunity
- funds for purchasing proper insurances and licensing
- money to pay for initial payroll expenses and training.
Mary, a venture capital banker, heard about Hank’s idea when she was playing racquetball with a mutual friend at the local gym and decided to investigate the idea in depth. After speaking with Hank and doing some market research she decided to bank roll him.
Charismatic Small Town Minister
A small town church board found a minister who agreed to come to their village and start a youth outreach program. This program would target present church family members but would also be available to others who did not belong to the congregation.
Tony, the new minister, was very charismatic; and it wasn’t long until the old church building just couldn’t handle the growth experienced from the aggressive youth program.
The church elders were at a crossroad as to what to do. Should they curtail any additional activities and try to meet just the present needs or go into debt for a new venue Tony was proposing. So much good was being done in the community: crime rates were drastically diminished, drug use in the community was almost unheard of, graduation from high school and enrollment in college and technical schools was on the rise, attendance at church services had to be met by splitting the worship service into two meetings. The elders decided to go ahead with a brand new venue, realizing the success experienced was due to this young enthusiastic minister and the team of assistance he had recruited. What if he died? Could they replace him in time to keep the momentum going? How would they pay for the obligation of the new facility if he did?
Mechanic and Auto Partsman
Bob, an auto mechanic, and Ed, a parts man at an auto parts store, were good friends. They had discussed the possibility of combining their skills and starting an auto parts and mechanic repair business but just didn’t have enough capital to bring their idea to fruition.
One day the owner of the auto parts store announced he was retiring and would be shutting down the store. Ed upon hearing this went to the owner and asked him if he would be interested in letting Bob and him form a partnership and buy him out.
The owner agreed to terms which would allow Ed and Bob to pay him out over a 10 year period of time. He wanted some guarantees which would assure him of receiving his long term investment to which Bob and Ed agreed. They felt they could as long as they both could work and make the monthly payment, but what would happen if they became disabled and couldn’t work, or worse yet what if one of them died leaving the other with the total debt? They went to their insurance agent to get some advice.
Horse Loving Country Girl
Cheyenne was a Montana country girl who became the heir to her grandfather’s fortune he had made in the oil fields of Texas.
She had always loved horses and became an expert cutting horse rider and roper. Her life revolved around horse events; and when she inherited her money, she became a very active member of the American Quarter Horse Association (AQHA.) Her newfound financial freedom allowed her to travel to all kinds of events, volunteer for worthy causes, and testify at congressional hearings about the benefit horses were for people suffering from multiple dystrophy and other mental and physical ailments.
She even sponsored scholarships for people who could not afford the therapeutic benefits of riding horses. She decided to endow a foundation which would be managed by the AQHA so her love for horses and helping people could be realized in perpetuity. It would be funded by her own resources rather than from the inheritance she had received. How to do it became her quest
Rough and Tumble Logger
Derek was a rough and tumble sort of guy who made his living as a heavy equipment operator in the woods of Oregon. His countenance was always one of “Bring on the grizzly bear and I will tame him for you. Tell me what needs to be done and then get out of my way. There ain’t nothing I can’t move with my equipment.”
The one time his countenance would change would be when his children would crawl upon his lap and pull at his scruffy old beard.
Due to the extremely high cost of the specialized equipment he ran, Derek carried a huge debt along with the normal family expenses every family faces. He knew as long as he could keep his equipment running he could meet the expenses he incurred. He also realized that due to the specialization of the equipment there would not be a readily available market for him to dispose of it if the economy turned down. The thing that haunted him the most though was what if he died and couldn’t provide for his kids? Who would pick up the task of clothing them, providing money for their schooling so they wouldn’t have to be manual laborers unless they wanted to, pay for a house they could always call home, and the clothing to allow them to be respectable in their own town.
Julie’s life dream was to get married to her lifelong friend, have a home with lots of children running around and enjoy the good life with friends and family around.
All this happened just as she dreamed until it all came tumbling down around her.
War had broken out and her husband felt it his patriotic duty to enlist and go off to battle. When he came home, something had changed. He no longer wanted to participate in family activities nor be involved in anyway with Julie. One day he left a note he wanted a divorce and left for good. He simply disappeared.
Fortunately, Julie had obtained her nursing degree earlier in life and with a little brushing up was able to secure a well paying position at the local hospital as an emergency room nurse. Her hours were flexible and with some detailed planning was able to spend quite a bit of time with her four children when they would come home from school. With so many demands on her time, she never ever found the time to socialize with the intent of finding a husband again.
The house Julie and her ex husband had purchased was a good house, but it needed some major upgrade in order to be livable. She took out a second mortgage to pay for upgrading the wiring, plumbing, and a new roof. With careful budgeting, Julie could meet her financial obligations and was able to provide a comfortable abode for her children.
Since she had no idea where her ex husband was, she always had the fear that if something were to happen to her, who would financially take care of her children until they were old enough to take care of themselves. Her employment was providing a retirement plan for her if she could simply stay employed long enough to receive it, but it would not be sufficient to take care of her children. She would have about an 18 year window of obligation for her to be free of her concern for the financial welfare of her family. What to do?
Revisit Tom and Jane
What about Tom and Jane? Well, five years down the road– and the picture now has them married, three children, heavy student loans, high mortgage on house, loan against one vehicle, Jane with a humanities degree unemployed, Tom teaching school with a summer job of selling pest control in Texas. Happily married with dreams of taking their kids on a Disney cruise before they become teenagers and want to be out on their own. They feel they are doing okay as long as some unforeseen or untimely event were to disrupt their financial circumstances. What if?
What are your observations? Mine boils down to just one: life insurance would be needed in any event where a person or entity could be in jeopardy of losing their source of income. Judging from the examples given above, it is apparent many different circumstances generate a need for cash replacement, and only life insurance can guarantee those circumstances can be met.