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    How to Get a Greater Return on Your Life Insurance Investment

    Although most people don’t like to think about it, getting life insurance is an important decision for you and your family. Buying life insurance now helps protect your dependents later if you’re not around to take care of them. After you’re gone, your family can use the proceeds to cover funeral costs, the mortgage and other loan payments, college tuition, plus additional miscellaneous expenses.

    Despite this, only about half of Americans (54%) owned life insurance in 2020. According to Statista, “Over half of those surveyed in 2019 who didn’t own life insurance said that it was too expensive. Almost one fifth of the respondents said that they didn’t think they needed it.” Another barrier to getting life insurance is the perception that it may be cheaper to self-insure. In this blog post, we’ll discuss the price of life insurance, and compare the return on investment for self-insuring to purchasing a life insurance policy.

    Life Insurance is Less Expensive than Most People Expect

    When asked by TrueBlue how much they expected a $250,000 term life insurance policy would cost, the majority of respondents—both owners and non-owners of life insurance policies—guessed $500 a year or more! In reality, life insurance is much less expensive than many people think.

    On average, a healthy, 30-year-old male can get a 20-year, $250,000 term life policy for approximately $160 a year, or about $13 a month. Many of our monthly discretionary expenses actually cost more than a standard term life policy for a healthy individual. At less than $15 per month, it’s easy to find expenses that can be trimmed or reallocated to a life insurance policy to provide your family with security.

    Self-Insuring Myths Busted

    Many of the 46% of Americans without life insurance have chosen to "self-insure," and they remain confident in their ability to fund their family's financial security in the event of their death. Many of these "self-insured" individuals claim that their success at 'timing the market' will make the most of their money.

    I hate to be the bearer of bad news, but when all is said and done, consumers that choose to go life insurance-less and instead opt for alternative means to self-insure, are still playing a game of risk. Regardless of how great of an investor you've proven to be in the past, there will always be an element of risk involved, just by the pure nature of investing.

    The Reality Test: Life Insurance vs. Self-Insuring

    The great thing about a life insurance policy is that it is finite; you know what you're getting. If you continue to pay the premium, there are no surprises. Top that with the fact that self-insuring requires a dollar-to-dollar match. If you save $50,000; you get $50,000 plus earnings (which could be minimal). When compared to that method, life insurance is pennies-on-the-collar. For demonstrative purposes only, consider the following scenarios:

    Scenario A:

    Mr. Life Insurance purchased a whole life insurance policy in 2009 for the amount of $100,000. He's paid approximately $250/year. In 2019, Mr. Life Insurance unexpectedly passes away, and his life insurance policy pays out $100,000 to his family and loved ones.

    Essentially, Mr. Life insurance paid out $2,500 over a course of ten years in out-of-pocket expenses that resulted in $100,000 payout.

    Scenario B:

    Mr. Self-Insured began a dedicated savings fund in 2009 to be left to his family in the event of his death. Before passing away in 2019, Mr. Self-Insured saved approximately $1,000/year for 10 years. At the time of his death, his family inherits $10,000 (plus earnings) in savings that Mr. Self-Insured has stored away.

    Keep in mind that, depending on investment and market conditions, if Mr. Self-Insured invested the "saved" money, it is quite possible that he may even lose money.

    The moral of the story is, by leveraging life insurance, you stand to make a greater return on your investment. If you would like to learn more about any or all of your options, remember that a life insurance agent can help assess your situation and needs and recommend what type or combination of life insurance options would be best for you.

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    Joan Cleveland, CLU, ChFC, REBC

    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 Consumer Credit Insurance Association, the Texas Association of Life and Health Insurers, as well as the Life Insurers Council. In addition, she is chair of LIMRA’s Strategic Marketing Issues Committee.

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