Will the Government Ever Require Life Insurance?
If you asked most people ten or fifteen years ago, almost no one would have guessed that today, in 2014, we are required by law to have health insurance. Whatever your opinion is of Obamacare, there is no dispute that it was a sweeping law that changed a fundamental part of our insurance is changing for the long-term. Is the same thing going to happen with our life insurance?
How Obamacare Came to Be?
Healthcare costs have been constantly rising for years, and unlike most other countries, in the United States each individual was responsible for the entire cost of their healthcare.
Whether people got insurance from a job, on their own, or didn’t have health insurance, the ultimate responsibility fell back to the individual, and if someone got very sick without insurance, they would have to foot the entire bill for what could easily become hundreds of thousands of dollars in medical expenses.
President Obama believed that we should move closer to models popular in Europe and Canada, where the government provides health coverage for everyone, but due to the political climate in the United States opted to support a more middle-of-the-road plan that moved us towards universal coverage without offering a universal government insurance plan.
The result is what we now know of as Obamacare. Under Obamacare, all United States citizens are required to have health insurance, whether through their employer, a private company, or a subsidized plan for lower income individuals and families offered through state or Federal insurance exchanges, or pay a tax penalty.
This protects hospitals and providers from offering health services without receiving payment, and hypothetically should lower overall health care costs and spending nationwide.
Should Life Insurance Be Required to Protect Families?
With health insurance now required for all, should we go the same route for life insurance?
There would be some big benefits with universal life insurance. Families would be protected from the unexpected funeral costs associated with losing a family member, and their income would be protected for a certain length of time, which would prevent one-income families from going into poverty from the loss of a primary income earner.
However, that takes a big step into governing our finances well beyond what Obamacare mandated. The vast majority of us will visit the doctor at least once a year, and will have increased need for medical care as we age. Almost everyone gets sick and needs care at some point every couple of years.
On the other hand, life insurance is more of a financial product than a health service product. While astute investors will put money in retirement accounts and the stock market, which the government encourages through retirement account tax benefits, the government does not require people to save or invest for the future in their own private accounts. On the contrary, we are required to save for the future through the social security program, which provides income in our retirement or in the event of a disability.
In the same way that the government can’t require us to invest or save, the government can’t currently require us to have life insurance.
Obamacare was controversial because the insurance mandate went against what is known as the Commerce Clause of the Constitution. While it was determined that the mandate penalty for not having health insurance did not go against the Commerce Clause, it was instead considered a tax rather than a requirement to buy a product.
What About Social Security?
One question people may wonder when looking at this topic is about the line between something like social security and life insurance. The government did require all Americans to participate in social security through the Social Security Act.
Could the government pass a law that expanded social security to include life insurance? Yes, assuming that participation were through a tax and not a requirement to buy a product. As you read above, that line can be difficult to determine and there is a lot of gray area.
Hypothetically, the government could enact a life insurance mandate. It would likely have to be structured similarly to social security, with certain income limits on the payroll tax and a cap on benefits. However, it is also likely to be increasingly controversial because not everyone has an heir or family they need to protect.
While health care and retirement funds impact us while we are alive, a life insurance tax would essentially be a death tax, where we tax people because they are going to die. And while I have a family I want to protect with insurance, there are many people without spouses or children who would object to being taxed for dying with no beneficiary.
Should I Get Life Insurance Anyway?
Whatever your thoughts are on government health insurance or government life insurance, it is up to only you to decide if life insurance is right for you today.
For anyone who is a primary income earner with a spouse and children, it is important to protect your family in the event something happens to you. I just bought my own term life insurance policy that will provide ten years of income to my family in case I unexpectedly pass away.
Life insurance is a good idea for most people with a family, so if your family is not protected, you should get a free quote to find out what it might cost to protect them today.
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