Life Insurance as an Act of Stewardship

A few years ago, I sat down with a couple who were both schoolteachers. They had recently purchased permanent life insurance policies, sold to them as a kind of financial Swiss Army knife: life insurance, retirement savings, college savings, even a pseudo bank account, all in one.

The promise? Tax-free growth and flexible use. But when we dug a little deeper, it became clear these products were among the least efficient ways they could pursue any of their stated goals. It was a case of a complex solution to a problem that called for simplicity, and it highlighted a crucial truth about life insurance: it is not one-size-fits-all.

Life insurance can be one of the more confusing areas of personal finance. Unfortunately, that's because it's often overcomplicated or misrepresented in the marketplace. At JMA, we view life insurance first and foremost as just that—insurance. Its primary purpose is to provide financial protection for your loved ones should the worst happen. Everything beyond that must be carefully evaluated within the broader context of your financial plan.

Who Needs Life Insurance?

Generally, life insurance is most appropriate for individuals who have financial dependents, such as a spouse or children. It's also a key consideration for business owners or individuals with significant joint debts, where the loss of one person could create financial strain for the other.

However, for young, single individuals without dependents or shared debt, life insurance is often unnecessary. Only when others begin relying on your income or support does life insurance become a critical part of the financial plan.

There are also those who want life insurance for reasons other than income replacement for their dependents. These individuals may not have a strict financial need but rather a desire to leave a legacy, support a charitable cause, or provide a cushion to family members. These are valid motivations, but like any financial decision, they should be weighed within the broader context of your overall goals and resources.

Common Misconceptions

Social media and advertising, unfortunately, have made life insurance even more confusing, often promoting misleading narratives and employing sales tactics that utilize fear or confusion. Some common myths include:

• That everyone needs life insurance
• That everyone should "buy term and invest the rest"
• That everyone needs a "one-size-fits-all" permanent policy

The truth is, there is no universal solution. The right type and amount of life insurance depends entirely on your specific needs, goals, and financial circumstances. It's not about following a popular rule of thumb—it's about thoughtful integration into your overall financial plan. Working with a fiduciary advisor can help ensure the decision is based on stewardship, not sales.

How Much Life Insurance Do You Need?

We guide clients through a process known as a capital needs analysis. It's a straightforward framework to determine how much life insurance, if any, is needed. It involves:

• Debt payoff: Covering outstanding debts like a mortgage, car loans, or student loans.
• Lump-sum expenses: Things like college tuition for your children, a gift or bequest to a family member or non-profit, or final expenses.
• Child care costs: Especially important for families with young children and a stay-at-home parent, who may not be accustomed to the high cost of child care.
• Income replacement: This is often the most critical piece. How much income would your surviving spouse and children need, and for how long? Do you want to provide five years of support? Ten? A lifetime?

This analysis helps determine whether you're underinsured, overinsured, or somewhere in between.

Scripture encourages us to plan wisely and care for our families. Proverbs 21:5 says, "The plans of the diligent lead surely to abundance, but everyone who is hasty comes only to poverty." Life insurance, when thoughtfully integrated into your financial plan, is one way we can live out this principle. It's a form of preparation and protection, but also an exercise in discipline and discernment. We aim to purchase what we need—no more, no less—so we can direct our resources toward the most impactful purposes: caring for our families and advancing God's Kingdom.

Final Thoughts

Life insurance can be a powerful tool, but like any tool, its value depends on how it's used. Be intentional. Ask the hard questions. Work with someone who puts your interests first. And above all, remember that good financial stewardship is about more than numbers; it's about aligning your resources with your values.

If you’re unsure about where life insurance fits into your financial plan, we’d be honored to help you evaluate it through the lens of biblical stewardship. Reach out to your JMA advisor to start the conversation.