Why Do I Need Life Insurance….Now?

The thought of one’s own mortality can be seemingly morbid, and rather off-putting for some. Even the thought of getting older can be enough to silence the topic. Truth is, there’s never a better time than now to get a firm grasp on your estate planning. I bet you’re wondering if now the best time is to be worrying about a life insurance policy, when you’re young and healthy.

Is it worth it to add another expense to the monthly budget? There’s so much to learn about life insurance, I’ll have to find some time down the road to learn more about it.

All seemingly legitimate concerns, but if these are the reasons you’re not protecting yourself, then you are deciding without all the information.

Another truth about life insurance is that there is a plethora of misconceptions floating around out there in internet land. It’s amazing to me how many of these misconceptions begin with “my aunt’s cousin was taking her trash out when she got to talking with her neighbor….” So, my goal is to put to bed some of these misconceptions, while spending a little time giving you the proper tools to make an informed decision. As a professional in the insurance industry, that’s always going to be my goal.

You’re still wondering why I haven’t gotten to the part about “why now?” In my opinion, protecting yourself and your family, while building some wealth and creating assets, thusly providing a better life is something that can always be addressed. But if you would like another reason, September is Life Insurance Awareness Month — and I would like to bring some awareness on the topic to as many families as I can.

According to LIMRA in their 2020 barometer study, 54% of all Americans have some form of life insurance. That may seem like a lot and is about two percent higher than the previous year — ending a ten-year decline in life insurance policies. But that’s just above half of all people. Of that 54% group of insured Americans, roughly 60% of them have their life insurance policy through a group plan. Meaning they have their life insurance through their employer. Don’t get me wrong, I always think it’s great when employers provide worthwhile benefits in their employee packages. There are a few things to keep in mind when it comes to employer-based group coverage;

· It’s a term policy in most cases, and that term is for the duration of time that you are employed with the company.

· The value of benefits that are paid out in the event of an unforeseen accident typically aren’t enough to pay off the final expenses.

· There’s no rule that says you can’t have your own life insurance policy when one is provided for you through your employer.

Its worth pointing out that LIMRA is a global research, consulting and developmental company to is the leading authority in this field. They span across 73 countries, and work with over 600 firms. LIMRA helps develop trainings like anti-money laundering for nearly all agents licensed in this field.

Life Insurance Is Also For The Living

One thing I hear mentioned to me by clients more than anything else is that there is so many products available that it makes it hard to learn them all. There’s a simple solution — don’t. It’s not necessary for a client to know every product offered by every carrier in their state, because 99% of those products aren’t relevant to them. I like to get this out of the way early, as it’s extremely important to understand what your goals are when deciding on which path to take.

It’s also very important to understand your goals before we get into the various benefits that each type of product offer — as you should be deciding based on what serves your needs best, not which benefits seem most appealing to you. Examples of some various types of goals are;

Pay off mortgage

Cover living expenses

Leave something for the children

Pay off all debt

Final expenses

As you can see, each goal is going to be different, and therefore the results will be completely different. Therefore, comparing benefits with a product that is irrelevant to your needs isn’t beneficial.

Before we get started with the various types of benefits, and good rule of thumb to keep in mind — whole life insurance has the added cash value benefit and will subsequently cost more in premiums than a term life insurance policy. Life insurance is a contract that is between you and the insurance company. There is going to be variances or “riders” available to each type of product, so learn as much as you can about that product that fits your needs best before signing this contract.

The benefits are almost always found within these riders. Many of the “living benefits” that come with products are focused around one of two areas. Becoming terminally ill or permanently disabled will trigger certain parts of your policy. This can range anywhere from stopping your premiums to allowing you access to your benefit amount in order to help pay for treatment of your illness. The specifics of these “living benefits” are going to vary between companies, so be sure to look at the plan brochure.

In my opinion, whole life insurance is a beast of its own — it is by far my favorite tool at our disposal, in the world of life insurance. But why? I alluded to this earlier in this article, whole life insurance comes with a cash value, which increases in value the longer you have the policy. That is because the policy is backed by investments, and interest payments on your policy are the gains from these investments. I should note that these investments are rather risk free, and are typically accurately projected in illustrations.

I shouldn’t forget the lending power behind the cash value of your policy. The loan is your own money, so you don’t have to ask a bank for permission and when you repay the loan — any interest paid is paid to you, since it is your own money that you borrowed. This is one of the aspects behind the wealth building tool, you don’t particularly have to justify the use of your money when you borrow it. You can essentially use the money you borrow from yourself for things like;

· Purchase rental property

· Put money into an annuity

· Start a family business

· Put into a second life insurance policy

The possibilities are all but endless, but please don’t forget the golden rule about borrowing money — please don’t borrow more than you can afford to repay. These ideas being presented aren’t intended to get anyone into any kind of financial trouble.

…..I Never Pulled The Trigger

Maybe the topic of life insurance casually came up in conversation at dinner many months ago, and it was something that you had intended on looking further into. But life always seemed to come up with a distraction. Or maybe the task of looking into insurance seemed daunting, and overwhelming. So, you found reasons to have it on the back burner. After all, you’re young and have plenty of time to get life insurance. Right?

What’s really been holding you up from having someone review your situation? Calculate how much it would cost in the event of a tragedy. I am referring to more than just what the final expenses would be. What kind of impact would your household see if you suddenly lost one of the incomes? What would you situation become in terms of paying off debts like car payments or credit cards? Would you now need some form of daycare? How is the mortgage(s) being paid moving forward? These are the kinds of expenses that aren’t typically thought about when you have the discussion of “how much life insurance do we need?”

Is there really any harm in having your situation reviewed by a professional, and listening to the advice they have to offer? The end of the day, it’s just information to hold onto for the next time you have the “what do you think about getting life insurance…” topic comes up at dinner. This way you become aware of your situation and can focus on the correct response for you and your family.

I can say this much about myself (and I suppose that is all I can really speak for on this topic) but the peace of mind that comes with knowing they are as protected as possible as all that I need to know in order to go “take the bull by the horn” regarding life insurance. If life has taught me anything, it’s that anything can happen at any given point. I’d ask myself one simple question — why risk it?

A Penny Saved Is A Penny Insured

One thing that I usually like to point out early on is that for every day that you go under insured or without life insurance, the more expensive it becomes for you to get it. According to LIMRA, a male will see a 258% increase in rates between ages 25 and 50. Anything can really happen to;

Medical diagnosis like a critical illness

Accident or medical event

We aren’t getting any younger

How affordable is life insurance? This is another question that I am asked often and is much harder to answer than the person asking it may believe. Its important to remember that life insurance comes in many forms, with many goals in mind. According to Bank Rate, both male & female 35 year olds can get a basic, term life insurance policy for less than $30 a month. This will surely cover the basics associated with final expenses. With your needs determining your path, this will help give you an idea of what your monthly premiums may look like, so that you can understand how affordable life insurance is to your situation. I like to keep in mind that paying a premium is in many cases, and when you consider all aspects, the cheaper path for families to take.

Hopefully September Has Brought Awareness

With any amount of luck, you have given some thought to your situation surrounding what coverages you have with life insurance. Given you some more of the big picture information, and ways of calculating how much insurance is really needed in order to continue with the same quality of life I am living now. If after reading this, you are still left with some questions about what would be best for you and your family — then I highly suggest seeking out a trusted professional, and setting up an appointment to go over all of your options. And remember, a review of your needs should never cost you anything!