As a big fan of vitamin D and ardent supporter of my own mental health, I start dreading the end of daylight saving time sometime around July. In my mind, driving home from work at literal dusk is a t...
According to a study conducted in 2011 by LIMRA, a worldwide research, consulting, and professional development organization that focuses on the insurance and financial services industry, four out of ten Americans do not have a life insurance policy. However, twenty nine million heads of households indicated they expect to purchase life insurance for themselves or others in their households in the next 12 months. For those that do ultimately obtain a policy, the question is "What's been preventing them from purchasing for so long?"
As research has shown, there are generally four primary concerns that play a part in delaying a customer from purchasing a life insurance policy for themself or for one of their family members.
1. Why do I need insurance?
Quite simply, life insurance provides continuity for your remaining family to maintain their lifestyle after your passing. Those often overlooked elements may include the neighborhood you live in, the school district your children attend, or even your family's long-term dreams and goals—college, relocation, travel, etc.
Sad but true, a lingering illness can wipe out your savings. Life insurance lets a surviving spouse or family replenish that financial security. It allows you to leave something you love—your family, your business, your alma mater, your favorite charity—with money, whether it's to replace income or leave behind a legacy.
2. How much insurance do I need?
Everyone's needs are different. The general rule of thumb is to secure eight to ten times the amount of your annual income. You should take into consideration the annual net income available to your family and any other source of incomes that may become available. If you have life insurance provided by your employer, check out this post to learn why you should consider supplementing that coverage with a policy of your own.
There are several other factors that will help determine the amount of coverage you select:
What financial responsibilities do you have?
Do you want to continue to work…forever?
What are your retirement plans?
- Are you planning on paying for your children's college education?
Keep in mind that these are just a handful of questions, and your unique needs should be considered. Because the process to determine level of coverage differs for everyone and there is no perfect algorithm to identify your needs, it's best to sit down with a life insurance specialist that can help solicit answers to help craft a policy that fits your situation. They really do provide you guidance and share their knowledge with you. There is really no wrong answer other than not taking any action at all.
3. What kind of insurance do I need?
As you already know, there are many different types of life insurance—basic, whole, permanent, term, variable, etc.—and they may all seem a little overwhelming. Just like the amount of insurance you need differs based on your lifestyle, the types of insurance that may be best suited for you also depend on a number of factors:
What is your current budget?
How "fixed" of a life insurance premium do you want?
- Is this a primary life insurance policy or are you supplementing other coverage?
Keep in mind that your age also dictates the availability of some of insurance products.
4. Who's going to explain it to me without trying to sell me?
Often times, there's a stigma attached to life insurance specialists. Consumers have a misperception that a life insurance specialist is overselling the amount of coverage they need. When a specialist analyzes your need, the suggested amount of coverage often seems like a huge amount, but that can be attributed to the lack of self-appreciation in all that you really do. Since consumers never really take the time to detail all that they do on a daily basis and comprehensively list out all their financial obligations far into the future, the initial recommendation made by a life insurance specialist may sometimes seem startling.
Consumers frequently report a level of discomfort with the fact that a life insurance agent's compensation is commission-based. To consumers, that translates to overselling policies to create greater profits for the agent. In actuality, it's no different than the commission your car salesman got paid when you purchased your vehicle. Consumers should understand that they're paying for a level of specialized knowledge that a professional life insurance agent brings to the table.
All in all, remember that while a life insurance policy is strongly encouraged for all to have, the types, amounts, and costs can differ significantly depending on your needs your current state of health, and your age. And, remember, you don't have to tackle it on your own; there are folks trained as specialists live and breathe life insurance, just waiting to share their knowledge with you.
Joan Cleveland, CLU, ChFC, REBC leads SWBC Life Insurance Company as President and CEO. With more than 30 years of experience in the life insurance industry. She holds her Agent licenses for Life, Accident, Health Insurance, and has multiple FINRA securities Licenses. Joan is a frequent industry speaker and media spokesperson. She is a member of the Board of Directors of the American Bankers Insurance Association, and co-chair for their Government Relations Committee. In addition she is chair of LIMRA’s Strategic Marketing Issues Committee.