Since she was in her early 20s, Danica Patrick has driven a racecar—speeding 200 miles per hour around an oval track bordered by concrete walls. It’s dangerous.
Forbes’ article, “Danica Patrick: You May Not Drive a Racecar, But You Still Need Life Insurance,” says that it’s a risk that she’s chosen to manage in part with life insurance. She’s owned life insurance since she started racing, and she now advocates on behalf of Life Happens, a nonprofit founded to help consumers make smart insurance decisions.
It’s a rite of passage to buy life insurance before your first race. However, Patrick has more personal reasons. Her parents were in favor, as each lost their fathers during childhood and witnessed the financial stress placed on their families. They managed the risk with life insurance and saving six months’ worth of expenses for an emergency.
As far as Patrick is concerned “she didn’t want to leave people with bills they can’t pay, and not only dealing with the sadness of a loss, but trying to figure out how you’re going to manage the rest of…life.”
Life insurance allows us to deal with personal loss without compounding it with financial stress. The suggested policy for most families is a term life insurance policy with a death benefit that is approximately 15 times their annual income.
With term life insurance, many life insurance needs will expire, assuming that a family is on track to reach financial independence around retirement age. The specific term of your policy should last at least through the children’s college years—and at most through the age at which you can reasonably expect to be financially independent.
If you want to create an estate, fund charitable bequests, replace an estate lost to taxes or build cash value, you will need some type of permanent life insurance—whole life, universal life, or variable life. Note that permanent life insurance creates additional financial complexity and can be expensive.
If you have a spouse or minor children, you have loved ones relying on you financially. Term life insurance can be pretty inexpensive. And even if you’re not a racecar driver, you face one of life’s most common risks—riding in or driving a motor vehicle.
As Patrick remarked, “It’s probably pretty uncommon to come across someone that hasn’t been in some kind of a car accident. Now, there are surely varying degrees, but you’re not wearing a six-point harness with a helmet on and an ambulance sitting nearby. So, it’s a risk no matter what you do if you’re driving anything.”
Reference: Forbes (Sept. 23, 2016) “Danica Patrick: You May Not Drive a Racecar, But You Still Need Life Insurance”