I was reading my local newspaper today. I came across an advertisement about a benefit dinner and silent auction to be held at the local VFW to raise funds for a recently widowed woman and her 3 young children. I recall reading about her spouse getting killed in an auto accident a couple months ago. Such sad news and now the family is having financial hardship. Unfortunately, most of us have experienced or seen other families being devastated by a sudden loss like this one.
Whenever I meet with clients, one of the things I ask about is if they have a life insurance to protect their family. I get a variety of answers, but generally the same ones each time—some have a policy through their employer, some have a tiny policy that was gifted to them by parents or grandparents, and some do not have a policy at all.
It always troubles me a bit when I learn my clients are married, have children, own their home, or have some combination of those things, and they do not have life insurance. I hear clients say that they aren’t old enough to need it. It’s too expensive. I also hear that it has been on the ‘to-do’ list and they just haven’t made time to do it. It is at this point that I ask, “is anyone depending on you for your income?” Typically, the other spouse speaks up and says, “Um, YES!” or they exchange that all too well know glance and nod.
My point in asking this is not to embarrass or put anyone on the spot. It is to make the point that no matter how old you are or how long this task has been on your to-do list, it can be devastating to your family’s well-being if you do not have a plan in place. Unfortunately, we are all going to die one day, and even more unfortunately, we typically don’t know when that might be. The right life insurance policy can take away a lot stress and worry for you and your loved ones.
Imagine you had a machine in your garage that produced money equal to your salary each year—I am confident that you would want to insure that machine just like you insure your car, home and boat in case it was stolen or destroyed. You have to look like at yourself like that machine in your garage: you go to work each day and a paycheck shows up in your bank account every 2 weeks. You need protection in case you can’t go to work someday and that paycheck stops coming to support your family and pay your bills.
Because this is something I am personally passionate about, this year, I’ve made it one of our company goals to talk to every one of our clients about the importance of life insurance. Here are some of the most common and unforgiving misunderstandings surrounding life insurance:
“My employer-provided life insurance is good enough.”Generally, employer provided plans only provide enough to cover 1 maybe 2 times your annual salary. However, your “salary” won’t include bonuses, raises, or company retirement contributions. Also, you likely won’t be able to keep your policy if you leave your employer, leaving you unprotected. While your employer policy might be fine for now, it may not be in the future. Be sure you know the terms of your policy and revisit it annually to make sure it is still adequate coverage.
“Life insurance is too expensive and I can’t afford it.” In a 2014 study conducted by Life Happens, 63% of people felt life insurance was too expensive to purchase—80% of them overestimated that cost. Many people mistakenly believe life insurance costs thousands of dollars each year, when it usually only costs a couple hundred for a decent term policy. Don’t let cost scare you. If you are a healthy human being, chances are you can get a policy for less than the cost of a gym membership per month.
“My health disqualifies me from getting a policy.” Don’t assume you are automatically disqualified from life insurance because of a health issue. Many companies cover a range of health conditions, and some do not even require medical underwriting. You may pay a bit more or have lower coverage amounts, but you would still be protected.
“A term policy is all anyone needs for life insurance.” While term policies generally make sense for a lot of people, there are circumstances and situations that warrant looking at a permanent policy if you need life insurance for your entire life. Examples might be providing for a special needs child or helping pay for long term care expenses in the future. Additionally, the cash value that a permanent policy generates can provide funds for education and retirement, as well as other tax-advantages for their owners.
“You get a better deal purchasing life insurance online.” The internet is great for doing your research on life insurance and finding an agent, but you may be paying the same amount whether you purchase online or through a real-life person. The benefit to buying from a real-life person (such as myself) is the personal service you get to help you figure out what you need specific to your life and situation. Terminology can be difficult to understand, as well as the different benefits and options each plan covers. In about an hour, I can usually get a good sense of the coverage you need and present a few options to you based on your situation. The best part? You may get better coverage at the same amount as you would if you spent hours doing the research yourself.
“I’m too young to worry about life insurance.” No, you’re not. In fact, life insurance makes the most sense to buy when you are younger because the premiums are less expensive and you have fewer assets and typically more debt that you would pass on to spouse and family. Your health is also better than if you were to wait until you get older and risk developing a medical condition that would make it more expensive. Worse yet—by the time you need it, it might be too late to get it.
“My family will take care of my spouse and kids if something happens to me.”You always believe your immediate family would rally and help in a time of need. And they would. But, can you expect them to put their financial plans in peril for your own family for an extended amount of time?How much burden do you want leave behind for your parents and siblings? They probably have their own set of financial goals and burdens.This would only compound if they were to help support your family.
Every person’s situation is different. You may not even need life insurance at all. The only way to know for sure is to sit down with a professional and discuss it. What’s the phrase--bad things happen to good people? Better safe than sorry? As corny as they are, they are popular adages for a reason. Be prepared and prevent yourself from being a good person that a bad thing happens to. I look forward to sitting down with you this year to discuss your options and answer your questions.
**All life insurance policy guarantees are subject to the timely payment of all required premiums and the claims paying ability of the issuing insurance company.
**Fixed insurance products and services offered through Fleming Investment Group or CES Insurance Agency.