Before you acquire or dismiss any idea or product, it is smart to have a clear answer to the question, “What’s it for?”
Consider French writer, Anatole France.
“An education isn’t how much you have committed to memory, or even how much you know. It’s being able to differentiate between what you do know and what you don’t.”
Why bother to know what you don’t know? Because what you have memorized and what you know are fundamentally useless until you know what to do with them. You cannot tell if your information is complete unless it has a purpose. Knowledge is knowing more than memorized names and other facts. It is structured and that structure helps people see the parts they lack. They care about those because Wisdom is using knowledge to help you manage your life effectively.
Wisdom can have voids too. If you don’t know what you want, when you want it and what you have to get it with, all the knowledge in the world will not help you. People fit this void by assuming things. Most of their problems with information and process would go away if they answered the “What’s it for?” question.
My field is life insurance. What is life insurance for?
The answer depends on the situation. Sometimes it is the least costly way to put liquidity into an estate that is fully invested in illiquid assets. Businesses typically. Sometimes it is to create wealth where none has yet been created. Young people die too. Sometimes it is to prepay expenses like income taxes, or charitable bequests. A process to deal with a problem. Sometimes it is a conservative, tax-preferred investment.
Most commonly, the purpose has not been defined and people own it because they think they are supposed to, or because of the momentum from some ancient decision.
People who own life insurance for what it is, make a mistake. People should own it for what it does. When you know what it does, for you specifically, most of the issues around how much and what kind go away. How much is usually solvable with arithmetic. What kind, is more problematic. There are dozens of choices, never mind trivial differences between insurers.
Acting on their own and mistrusting advisors, people usually cannot know enough to make a good decision, so they guess or do nothing. Usually do nothing. Nothing is the best choice infrequently.
Life insurance is a tool. A way to get something you need. Like an electric drill. No one wants a drill, they want holes.
There are good ways to fit product to purpose. You should explore them. Insurance poor works two ways. You paid too much premium for inappropriate product, or the heirs and executor have too few liquid assets to carry out their duties.
Think about Malcolm Forbes and why he acquired huge amounts of life insurance.
“Life insurance is an efficient way to transfer wealth to your heirs.”
Nothing much has changed since.
Don Shaughnessy arranges life insurance for people who understand the value of a life insured estate. He can be reached at The Protectors Group, a large insurance, employee benefits, and investment agency in Peterborough, Ontario. In previous careers, he has been a partner in a large international public accounting firm, CEO of a software start-up, a partner in an energy management system importer, and briefly in the restaurant business.
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