Insurance is usually one of the regular, significant expenses of a family. Someone once asked me: "How much insurance does a person need?"

He then went on to talk about a hypothetical individual: Let us assume that this individual is 50 years old and has the capacity to earn P1 million a year. Let us say that this individual will work up to the age of 60. He then has the capacity to earn P10 million, based on his present earnings. If this individual is insured for only P1 million or P2 million, would that be enough?

Logically speaking, you would say "no." Logically speaking, you can be sure too, that the person talking about this hypothetical individual is an insurance person trying to sell you more insurance.

If you desire to provide for your family's needs and have them maintain their present lifestyle, even when you are gone, then the above argument about how much insurance you need holds water.

My view, though, is that insurance should only allow your family some time to recover -- to make adjustments, to survive -- once you are gone. Insurance will help them have a more comfortable life, in your absence, but it does not mean that they can just sit pretty forever. Remaining family members must have it in them to think of ways to live a meaningful life, even without your continuing income stream. Otherwise, they have no business being alive. =)

With that response of mine, the insurance person then shifted to talking about one-income households. He says that my argument holds for families where both spouses are equally skilled to work and run the household. What about a family where one spouse is totally dependent on the other? Has never worked a day in his or her life? How will he or she provide for the family without enough insurance?

What about you? How much insurance do you need for your family? Think about it and provide accordingly.

[By Angelica Viloria | Friday, February 23, 2007]

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