Boss Blog: April 5, 2017
Why people don’t buy Life Insurance……and why they are wrong
This topic is never fun but it may be one of the most important decisions you make. Insurance always gets a bad rap. Like many things in life, there are good and bad parts of it. Today I am going to talk about the reasons why people don’t buy personal Life Insurance. I’m also going to explain why they are wrong. Budget Boss is all about making the right decisions so listen up cause this one might save you thousands or even millions of dollars.
1) I’m healthy, strong and young, why would I need life insurance!
This is the best time to get insurance for 2 reasons. First of all insurance companies don’t insure unhealthy people. Also if you are young and healthy it will be dirt cheap to insure yourself. Fast forward ten years and you will be older of course, which automatically makes it more expensive. You may also be less healthy which could make your coverage even more expensive or impossible. Here are some quotes on life insurance to illustrate my point:
$250,000 20 Year Coverage (Standard Male) Monthly Premium
Age25: $20.48
Age 45: $50.85
Age 50: $81.00
Securing coverage at a young age makes it cheaper and feasible to have lifetime protection regardless of your health later in life. It’s always best to know where you stand. This brings me to my next point.
2) Life Insurance is too expensive!
As illustrated with the above quotes it is shown that insurance can be cheap. I think the bigger question is: How expensive is NOT having coverage? Many people think that insurance gets people rich when someone dies. That couldn’t be further from the truth. Insurance is in place to allow life to continue without financial disruption. Here is a case to explain my point.
Pete and Karen have one child Cindy. Pete is 30, Karen is 29 and Cindy’s 3 years old. Pete and Karen both make 50K a year and own a home with a 300K mortgage. They live a fairly comfortable life but all that can change going down to one income. Meeting daily needs would be impossible if one of them were gone. Life Insurance would not make the surviving partner rich. All a policy would do is allow the surviving partner continue along the path they were headed. This path includes keeping the family home, sending Cindy to college and retiring at a decent age. The devastation of losing your partner can quickly be replaced with the unnecessary devastation of losing everything else. The horror stories are real.
Insurance need: Peter and Karen
15 years of income = $750K (gets Cindy to 18 years old)
Mortgage = $300K
School for Cindy = $50K minimum
Total: 1.1 Million (not including any other debts, ie: car, credit cards, etc.)
You can see how this adds up quick. A million buck ain’t what it used to be.
3) I’m Single and don’t have kids!
Good point! It’s hard to think of who would be negatively impacted financially if you died. I will help you out. First, do you want to be single and not have kids forever? If you don’t, as mentioned in section 1 you don’t want to wait until you get older, and possibly uninsurable, to get coverage. Secondly, what about your parents? “Well they have money, they can afford my funeral.” That may be true but did you plan on looking after them when they got older? If they got sick and you were gone, taking care of them might be an issue. Also, what if they co-signed on loans that they would be on the hook for if you died. Securing coverage for yourself can ensure that everyone you love is taken care of if you leave unexpectedly. Your life is worth something. Chances are it is a lot more than you think.
4) I have group Insurance through work!
Group Insurance is great, sort of. Employers offer insurance that is a multiple of your base salary. Most often it is one or two times your salary. If you get paid 50K per year, then you are only covered for 50-100K. That is dangerously under-insured for most people. Group coverage is also not portable. That means that when you leave the group the coverage doesn’t go with you. Personal coverage is yours and goes where you go. Being that more and more employers are offering less and less in an effort to reduce costs, securing your own coverage is essential.
If you have a family it is a simple decision. Caring for your loved ones means protecting them. When you are just starting your life, it comes down to other things. Here are a few questions you can ask yourself:
- Where do I see myself in 5-10 years?
- Do I plan on being there financially for the people in my life?
- Is what I have through work really enough?
- Will I get any healthier?
I recently helped a client gain personal coverage. After she signed the papers when I delivered the policy the first words out of her mouth was, “Wow, I feel like such an adult!!” She was right. She took the responsible and cost-effective step of securing insurance at an age that will ensure she is covered for life. It takes “adulting” to a new level. My advice is this: Put through an application, see where you stand. You don’t want to wait until it’s too late to seek coverage.
“A healthy person has a million wishes; a sick person has only one.”
-Agnes Karll Schwest Krankenpfleger
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Joseph James Francis is a Financial Advisor. You can find him on various social media platforms and at www.budgetboss.ca.