PROTECT HUMAN CAPITAL
Life insurance is typically purchased between the ages of 20 and 50 to protect the value of a person’s potential income.
Insurance replaces necessary regular income lost due to premature death.
Generally, our standard of living is proportional to our source of income. If we live as a couple, we base everything on two incomes and when children are added, we also add these expenses.
In addition, we get into debt with possibly a mortgage and credit, so the liabilities are higher and usually the investments are few.
So, imagine for a moment the premature death of one of the two. What a disaster!
This is why for the first half of our adult life, we buy life insurance to protect the loss of a loved one who was contributing financially to the family budget. We, therefore, replace human capital by subscribing to this life insurance.
This insurance pays off the debts, and the difference is invested in order to allow the survivor to maintain part of their standard of living.
As a general rule, as the income is lower at the start of a career, we opt more for temporary insurance, because it is inexpensive and can increase the death benefit as needed.