Would you fly in a single-engine plane without a parachute? Would you go white-water rafting without a life preserver? Would you travel the desert without a canteen? If not, would that show a lack of faith in God? You may say that’s absurd, but many people consider insurance a lack of faith.
Many people choose self-insurance or go without insurance while others take on too much insurance. During downtimes, insurance can be a financial lifesaver. But is it wise and godly to protect against illness, death, accident, or theft? Many Christians refuse insurance simply because they argue that it takes God out of the picture. However, God’s Word instructs us to prepare for good and bad times.
When insurance is used properly it can help a family during a major illness or disability, it can provide replacement income for the loss of a spouse, it can rebuild a damaged home, and it can pay medical bills during an extended stay in a nursing home. Insurance will never cover every catastrophe, but it can be a wise way to protect the assets and income God blesses you with. You should also be careful not to allow insurance to be a replacement for God. Balancing wise planning and faith in God should be the goal of every protection plan—enough to protect your family, but not so much as to limit your dependence on God.
Balancing Insurance and Faith in God
In his book Money, Possessions, and Eternity, Randy Alcorn asks, “But where does God fit into all this? The greatest danger in insurance is that it so easily undermines our sense of dependency on God. Is insurance a God-given means of provision, or is it in reality a theological end-run that makes trusting God unnecessary?” The act of buying insurance in itself doesn’t show a lack of trust in God; instead it demonstrates proper planning. God clearly wants us to provide for our families as demonstrated in 1Timothy 5:8: “If anyone does not provide for his own, and especially for those of his household, he has denied the faith and is worse than an unbeliever” (NASB).
But we cannot be too greedy and slothful with our insurance policies either. Life insurance is a financial tool just like a mutual fund, a stock, or a CD. These tools are morally neutral. The attitude in using the tools determines whether insurance is being used properly in God’s eyes. Insurance should not be bought because of fear but rather with faith.
Jeff’s Legacy
Jeff worked at a telephone company for nearly twenty years after graduating from high school. At thirty-seven, he was the sole breadwinner for his family. He always thought that his company would take care of him in the event of an untimely death. He was confident that his family was secure. He was a family man and loved spending time with his wife, Julie, and their two young children. They were fortunate that Jeff’s income allowed Julie to stay home with the children.
When he came in for an appointment, Jeff was shocked that he was underinsured. If he passed away, his group term insurance would have covered only two times his yearly salary. This would last only four to six years with his family’s current expenses. His wife would have to go back to work and put the kids in day care. Jeff opted to buy additional life insurance to cover his income until the kids were through college. Sadly, this was the wisest investment that Jeff ever made.
Less than a year after being accepted for insurance, he was diagnosed with brain cancer. Jeff never reached his thirty-ninth birthday. The silver lining in the story was the policy that Jeff bought for his family. He prepared and planned and left his family in a sound financial position. Julie says, “Had Jeff not met with you, a tragedy would have been made worse. Yes, God could have performed a miracle. He could have used the church family to bail us out, but through this policy, He was able to carry us through the toughest loss we ever faced.” Julie has since gone to nursing school at night and become an RN. The insurance proceeds allowed her to pursue a passion rather than forcing her to take a job.
Why Insure?
Insurance provides protection for unanticipated expenses you couldn’t otherwise pay. For example, in the case of Jeff and Julie, insurance was used to produce needed income after Jeff’s death. Buying insurance is like looking ahead. If you knew you would face a financial problem down the road and could afford to protect your family and your assets at a fraction of the replacement cost, why would you not at least consider it? Insurance also frees up surplus funds.
In Jeff and Julie’s case, Jeff made $85,000 a year. When he died, the family still needed at least $75,000 in yearly income. Social Security provided around $12,000 a year for dependent care. The family still needed $63,000 a year to cover the gap. Where would these funds come from? Jeff and his family could have saved over time, but in this case he had less than a year to live. The other alternative was to buy life insurance, which he did, and that turned out to be the wise choice. No one knows what the future holds, but planning ahead is prudent and resourceful.
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It seems silly to me that people would avoid insurance, especially life insurance, b/c it takes God out of the picture. I would hope part of the equation is that God gave us the intelligence to plan for unforseen circumstances by using instruments such as life insurance.
Personally, people seem to have a problem with placing responsibility in others and thinking they will take care of it for them. In this case, they think God will watch over them and bad things won’t happen to them.
We all need to take responsibility for our life and actions and not put it on others and worse yet, blame them when something happens.
In a land of over insurance, I say as little as possible.
Another part of this is to remember that spending money foolishly is a moral decision that leads to wealth reduction.
Thanks for the great article Jay. You are right that life insurance can be the most important decision a person makes, (in the unlikely early death scenario) and also the best decision someone can make (in the more likely long life scenario), but getting into that would be too long a discussion for here.
I will argue with a couple small statements that you made, although they weren’t your main points, so we might not disagree at all.
It is impossible to over-insure or to self-insure. In the latter, you either have insurance, or you do not. In the case that you do not, you must (if you aspire to some level of prudence) live differently than when you have insurance. You’re speaking of life insurance here, so I’ll use that example. If I don’t have life insurance and die, my family will have less money. If I had one million dollars and claimed to be “self insured”, my family would get $1M. but if you had the same $1M and also had $1M in life ins. and died, your family would get $2M. One of us had insurance, and one didn’t, and the families or charities that benefited would absolutely feel the difference, even if I told myself I was “self insured”.
As to “over insuring”, that is not possible because an insurance company will only insure the true value of things. If my home is worth $250K, I can not insure it for $1M, because the ins co. would view this as giving me incentive to burn my house down. They are much smarter than to give you that incentive. The same is true with life insurance. They calculate every person’s Human Life Value before offering that person insurance. They will not offer you more than your HLV, which is based on your age and income or assets. They feel it is bad stewardship for their company to insure you for more than you are worth because there are people out there who would be tempted to kill themselves to hand this money to their family (after a 2 yr waiting period). No one talks about this unpleasantness, but the company knows that would be bad stewardship and won’t do over-insure.
It will probably be another month or two before we blog much on this topic, but this idea is best looked at in he context of disccusing Ownership vs. Stewardship here. It’s impossible to seperate the financial aspect of our lives from our spiritual calling, so we see Jesus discuss it often. In this context, If I am stewarding my life for Christ, shouldn’t I make prudent decisions with the life He bought? You made a great point above that yes I should! thanks. wes
Wes,
Life insurance companies will not let someone earning $30,000 per year buy a $5,000,000 policy, but they will definitely let you buy more life insurance than you actually need.
I work, my wife stays home with our two young children. I have life insurance but I don’t worship the money and certainly don’t place my faith in any company much less a life insurance company. I feel comfortable that if something happened to me that I would want my wife to still stay home and raise our children and continue ministering to the other non-christian and christian mom’s that she is networked with.
I’d like some input. I’m 51 and my term life policy comes due soon. I’m not sure if I should get another life insurance policy or not. I’ve always felt life insurance was important for when you had young children so that if one of the parents died, the family would be taken care of. Now that my husband and I are empty nesters I don’t see the need. What is your opinion? If you recommend it, which one would be best?
Thanks for your help.
Pat Dolezal
Hello Pat, I just saw your post and thought I would offer up something for you. When you have a guaranteed death benefit the day you die of a substantial amount of money, do you thikn that would give you the freedom to live your life a little differently while you’re alive? Perhaps you’ld feel more free to spend and enjoy what you have rather than being petrified that you would run out and end your last few decades as a hoarding miser? this is too big a topic, but if this resonates, you might want to check out a huge series I just did on all the different facets of life insurance benefits for while you’re alive at http://www.kingdomcallingadvisors.com/2009/08/27/permanent-life-insurance-as-a-savings-vehicle/
There’s also some really cool videos we just put up on the subject http://www.kingdomcallingadvisors.com/tools-infinite-banking-become-your-own-banker/
Michael, I see that you responded to my earlier comment above. How do you know what you will need? This is a serious (not trying to be smart allec) question. I believe we have very serious inflation on our doorstep beyond what most can imagine. If that’s the case, the amount that you thikn you “need” will be far greater than you can imagine today. If your health changes, and you can no longer get life insurance (at all or at the rates you can get today), then you are out of luck. The fortunate thing is that you can still say you don’t “need” any. Because your family would not die without your life insurance benefit. It just might mean they don’t have what you or they “want”. There actually is no such thing as “need”, yet this is the concept most often talked about in the industry.