Can You Pass the Insurance Test?

Whether you have children or not, you're probably familiar with the fictional lifestyles of these five wildly popular characters: Spider-Man, Batman, Fred Flintstone, Harry Potter, and Marge Simpson. A survey conducted recently by the Life and Health Insurance Foundation for Education (LIFE) asked participants which one of the five was most in need of life insurance. Believe it or not, only 16 percent correctly identified hard-working family man Fred Flintstone.¹

This may seem like a whimsical question, but it illustrates an important point. Regardless of your livelihood, if you have a family who depend on your income, you probably need sufficient life insurance coverage.

It must be a common misperception that individuals with dangerous occupations or hobbies somehow need insurance protection more than the average person. A whopping 28 percent of those surveyed thought that the building-scaling Spider-Man needed life insurance the most. Another 18 percent picked the crime-fighting millionaire Batman.² But neither of these superheroes is married or has children (real or imaginary) who might suffer financial ruin if some villain finally found a way to do him in.

On the other hand, how would Wilma Flintstone and baby Pebbles make ends meet if something ever happened to that loveable lug Fred? Stay-at-home mom Marge Simpson was also overlooked by survey participants. Her husband Homer might find it difficult and expensive to care for their three young kids in her absence.

To determine how much coverage you need, consider your family's assets, income, and actual expenses. More simply, the American Council of Life Insurers suggests 10 times your annual earnings.³ Some parents find it reassuring to add enough coverage to pay for their children's college education.

The cost and availability of life insurance depend on such factors as age, health, and the type and amount of insurance purchased. Before implementing a strategy involving life insurance, it would be prudent to make sure that you are insurable by having the policy approved.

You may not spend your free time fighting crime, but providing a life insurance benefit that would ensure your family the financial resources to continue living is certainly one heroic measure.

1-2) Journal of Financial Planning, December 2005
3) American Council of Life Insurers, 2005

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