Why should life insurance factor into your personal financial planning? Here is a simple overview from our CEO and Co-Founder, Jamie Hale.
Jamie lost his dad unexpectedly at age 11 and has personally experienced what life insurance can do to change a family’s life. Prior to co-founding Ladder, he worked for decades in financial asset management.
One way to think about life insurance and your need for life insurance in your personal financial portfolio is to think about things in terms of your human capital potential.
This sounds a little nerdy, but here is an explanation:
Over time people invest in themselves by going to school, learning different skills and investing in themselves to get better jobs and make more money over time. That is awesome.
Then they borrow against those future earnings to get a mortgage, get a car loan, or secure other personal loans.
One of the things life insurance does is take that human capital, your potential future earnings, and hedge those earnings for your loved ones. Term life insurance hedges the human capital risk in your family’s overall financial portfolio.
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We are massive fans of term life insurance because it helps you hedge an idiosyncratic risk that could have a really negative impact on your family. It spreads that risk across a really big base of other policyholders such that everyone is better off from moving the risk around.
It’s kind of like stock diversification. You don’t want to have a massive idiosyncratic risk in a single stock because it’s really risky. By hedging that, by pooling and diversifying that risk, you’re way better off. Life insurance lets you diversify that human capital risk for your loved ones so you can know they will be financially okay in the future.
Taking a few moments to factor term life insurance into your family’s financial plan now can give you unlimited peace of mind and is savvy financial planning.
Ladder wants to help people live their best lives, so we built life insurance that is instant, simple and smart. We offer direct-to-consumer, fully underwritten, term life insurance online. We do not charge policy fees and we do not employ commissioned sales agents. You can apply for life insurance coverage in minutes and get an instant decision. You can also decrease your coverage online over time, with no fees or penalties, so you can adjust your coverage as your family’s life needs change.