I have delivered insurance checks in my career and nobody has ever told me they have too much life insurance after a loved one dies. It’s really ironic because there are many media pundits who beat up on having unnecessary life insurance, but those writers don’t have to pick up the pieces after a major breadwinner dies in a family. Recent studies still say that the odds of dying are 1 out of 1. LOL.
Even though I think that most families are woefully underinsured when it comes to life insurance, the greatest gap I see amongst Generation X and Generation Y is an apathetic amount of disability insurance. Most people who work for companies believe that the amount of disability insurance they get through work will be adequate to cover their situation should they sustain a long term disability. The stark reality is that most Gen X’ers an Gen Y’ers don’t even read the benefits manual to understand the nature of the insurance policy they get through work that often through the base coverage will only protect 60% of their income. After you take out taxes, for most it’s more than a 50% pay cut. What is your most valuable asset? Clearly, over the long run, it’s your ability to earn and sustain a consistent income.
Having a comprehensive risk management program is an important part of designing a comprehensive financial plan. However, most people are over insured when it comes to their homeowners insurance. When you assess all of the historical risks within your premium dollars spent on insurance, spending extra money by not accurately assessing the value of the contents of your home, deductible amounts, and unnecessary riders could really tack on more premium dollars than you need to spend. You should also make sure you don’t have any overlapping coverage between different types of insurance policies.
The moral of the story is that for younger people the most important asset to protect is the Golden Goose . . . . or you might not be able to make the Golden Nest Egg.