Life Insurance Is A Value

Behavioural-economics would have us believe that people are much more motivated to avoid loss than achieve a gain. Daniel Kahneman makes that a central point of his thesis. It’s accepted as self-evident by nearly everyone in the life insurance business.

Accordingly it often forms the basis for their presentations. Life insurance, to some extent, defeats loss. Therefore people will be motivated to acquire it. Really!?

As always, ask what’s the inverse?

What if people don’t care? Or, what if they value gain and loss equally? What if people value wins more than they fear or care about losses?

It seems there is evidence to deny the loss aversion characteristic. In an article from Scientific American we see a discussion. Why The Most Improtant Idea In Beavioural Decision Making Is A Fallacy

It seems the loss versus gain idea is incomplete. Generally in the abstract people are unconcerned. If given an abstract choice between winning and avoiding loss they will choose winning. If you add aspects of each they may change their mind. For example, if losing $10,000 causes them to be thrown out of their home while $10,000 means a nice vacation they will choose avoiding loss.

It is not the win or the loss it is the comparative advantage of each.

Meaning.

More life insurance insurance will be arranged for those who present the cost of the loss objectively and also present life insurance values.

  1. Improved financial predictability.
  2. Enhanced ability to invest better. Liquidity is less crucial.
  3. Cheaper way to organize estate liquidity
  4. Self liquidating solution. You don’t have to live 40 years and save money to be able to pay taxes in the estate.
  5. Income tax advantages while living. A separate asset class to consider.
  6. Problem isolation with solution attached.
    • Providing for a disabled heir without disinheriting other children,
    • Provide for a second spouse without disinheriting children.
  7. Dramatically magnify the value of a gift to a charity

Many people have the first need and know the cost. Would they not be more motivated or at least less averse if they could see getting something of value too.

Help them see what life insurance does for them. Avoid the cost only approach. People like to win too and generally life insurance is presented in a way that the person who pays the bills gets little in the way of selfish advantage.

Most of all notice that owning life insurance lets you invest the rest differently. Life insurance is not entirely about what it is. It is about what it allows you to do because you have it.


I help people understand and manage risk and other financial issues. To help them achieve and exceed their goals, I use tax efficiencies and design advantages. The result: more security, more efficient income, larger and more liquid estates.

Please be in touch if I can help you. don@moneyfyi.com 705-927-4770

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