Why High-Income Families Can Still Be Underinsured

Why High-Income Families Can Still Be Underinsured

You make good money. You save. You invest. You have a 401(k). Maybe you even have a financial advisor.

So why could your family still be financially vulnerable if something happened to you or your spouse?

You may not have enough life insurance.

This is especially common among high-income, dual-income families with children. Because both spouses earn a substantial income, it can be easy to assume the family is financially secure.

But income isn’t the same as financial security.

Dual-Income Doesn’t Mean No Risk

Consider a family where one spouse earns $300,000 and the other earns $200,000. They have two children, a $700,000 mortgage, college savings goals and retirement accounts.

If the $300,000 earner dies, the family doesn’t simply lose a paycheck.

They could also face:

• Mortgage and other debts

• Childcare expenses

• College funding

• Reduced retirement savings

• Higher household expenses

• Potentially reduced work hours for the surviving spouse

And if the surviving spouse has to become both the breadwinner and primary parent, the financial impact can be much larger than the lost salary alone.

Don’t Forget the Stay-at-Home Spouse

The spouse who doesn’t earn a paycheck can also be significantly underinsured.

Who would replace the childcare, transportation, household management and other responsibilities they provide?

The answer could be expensive.

The economic value of a person isn’t always reflected on a W-2.

Employer Coverage May Not Be Enough

Another common mistake is assuming employer-provided life insurance solves the problem.

Many employer policies provide only a multiple of salary, which may be nowhere near enough for a high-income family’s actual needs. And coverage can change when you change jobs.

The better question isn’t:

“How much life insurance do I have?”

It’s:

“If one of us died tomorrow, would our financial plan still work?”

Don’t Rely on a Rule of Thumb

You’ve probably heard that you need five, eight or ten times your income in life insurance.

Those formulas can provide a starting point, but every family’s situation is different.

Instead, calculate the actual financial gap created by an early death:

Income replacement + debt + childcare + education + retirement needs – existing assets and other resources = potential insurance need.

For some families, term insurance may be an efficient way to cover the years when children are young and retirement assets are still being accumulated. Others may have legitimate reasons to consider permanent insurance.

The product should come after determining the financial need.

Protect the Asset That Builds Your Wealth

High-income families spend a lot of time protecting their investments, homes and businesses.

But they sometimes overlook the asset that makes all of those things possible:

their future earning power.

For many successful families, that future income is worth millions of dollars.

Life insurance isn’t about expecting something bad to happen.

It’s about making sure that if something does happen, your family’s financial plan doesn’t die with you.

The goal isn’t simply to build wealth. It’s to protect the people and the plan behind it.

Click here to schedule a meeting — I’m here to help you take the next step toward financial freedom.

Colin Symons, CIO Lloyd Financial Group

Stocks fell back, briefly, after the FOMC Minutes showed some members wanted a hike. Not sure how that’s a surprise.

The Treasury market got a big boost on news of increased support for liquidity on longer-dated Treasuries. Some are calling it a version of QE, then again, people love to call many things QE. Government panic is generally good for assets, though. Some of that bond move is getting undone this morning, though the dollar remains sharply down.

In addition to the Treasury news above, the crypto space was also lifted by news that Trump was pushing Congress to bring clearer rules to the assets.

Gold and precious metals were also sharply higher on the news.

Moderna (MRNA) was up 177% on a successful melanoma trial, with partner Merck (MRK) up 13%.

Marvell (MRVL) was up 10% on a deal with GOOG to make TPUs with them in exchange for a stake in MRVL.

Initial Claims today, along with Philly Fed Manufacturing.

Bottom line: Government policy panic is generally good for risk assets over time.

Click here to schedule a meeting — I’m here to help you take the next step toward financial freedom.

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