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We generally purchase life insurance as a means for protecting our dependents from economic hardship. While most non-term life insurance policies such as endowment policies, whole-life policies, and such payout without much hassle, the same isn’t true of term life insurance policies — especially the ones issued by private insurers. How would you plan ahead and mitigate for such a scenario where your term life insurance doesn’t payout to your dependents?
You, of course, wouldn’t be there to witness this, but the purpose behind my question is to find out if planning for this financial risk is a good idea and if it is how would you go about it?
Personally, I think it’s a good idea to plan for this financial risk. The only options that I can think of are:
- Diversify your term life insurance requirements across insurers. The probability of a payout does increase with this approach. But in a recent poll, most of you voted against purchasing policies from private insurers. Does this question make you think again?
- Track your net worth and ensure that it grows steadily. Your dependents could liquidate your net worth and plan accordingly. But for most of us, our net worth wouldn’t be remotely close to our insurance coverage. So, I’m not sure if this is even a valid idea.
What do you think?
Thanks for reading this article. I'd love to hear your opinion. Please use the comments section below to share your thoughts. I frequently write new articles that also cover several other aspects of personal finance including credit cards, financial goals, health insurance, income tax, life insurance, mutual funds, retirement planning, and much more. You can Subscribe through Email and receive new articles directly in your Inbox or you can Subscribe through the RSS Feed and receive new articles in your feed reader.