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Monday, January 25, 2021

Why you don’t have Life Insurance… and why you should

Life insurance used to be called death insurance. The name didn’t stick, for obvious reasons. Back in the day people thought it bad luck to put a number on top of their heads. Despite this, the product has been around since the early 1700s and major life Insurance companies in Canada have been around since before we were even a country. I will admit I am biased, but if you ask me, everyone should have life insurance. EVERYONE. No exceptions. Despite my relative genius, many do not hold this belief. I want to get to the bottom of this matter once and for all. Let’s see all the reasons people don’t get life insurance and I will break them done one by one.

I don’t need it

Will you die? Yes. So, you need it. Next question sir. But really though. You will die, hopefully, many years from now, (sooner maybe if you don’t wear your mask), and when you do it will cost money. I have clients who run funeral homes and let’s just say business is booming. The fact of the matter is death is not cheap. Funerals cost a fortune and even cremation prices have gone up as the business realized most people don’t care to have a lavish burial. So unless you plan on floating down the river on a raft and having a flaming arrow cremate you at sea, there will be money involved when you die. Therefore, you need life insurance.

I am young

For now. You will get old. It happens every day. Even worse than getting old is getting unhealthy. Chronic conditions, medications, injuries, all make insurance harder to get as you get older. As time goes on it simply gets more and more expensive to get. A 20-year-old non-smoking male can get 250K worth of coverage for $16.20 a month. For a 20-year-old female, it is only $11.70. Before you ask me why coverage for women is cheaper than men, I suggest you put down the beer funnel and get off the roof. Nevertheless, being young and healthy is the BEST TIME to get insurance. You can lock in dirt-cheap rates and get the application done in minutes. I have helped hundreds of young people secure cheap life insurance coverage and it is one of the best things you can do as a young adult to show you are mature and prudent. All that for the cost of 2 beers, not bad.

It is expensive

I just showed you how cheap it can be, but let’s discuss the cost a little bit more. There are expensive forms of life insurance. It also can be pricier for older individuals. That same coverage we got the 20-year-old male costs a 60-year-old male $117.45 a month. The price for the 20-year-old female jumps to $82.80 a month at age 60. Quite simply, life insurance is about risk. Older people are at risk of dying more than younger people. Seems straight forward right? Now if you are at a higher risk of dying, would it not make even more sense to get life insurance? It is kind of like the guy not wearing a mask in public because of a medical exemption. If you have a medical condition so bad that wearing a mask is tough, wouldn’t being in public during a flu pandemic not be in your best interest? Yes, life is confusing, or so it seems. The reasons to get coverage remain similar throughout your life. You simply decide whether or not you care enough to take the steps to do something about it. As for the expensive forms of life insurance coverage. Yes, there are many expensive forms of coverage. Your goal should be to get the most amount of coverage for the cheapest price. This should also be the goal of your life insurance advisor. Do not get caught up in the web of expensive coverage from shady actors looking to make a quick commission. I will get into this more later.

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I can’t get it

Yes, you can. Anyone can. Even if you are dying you can. The only factor is how much will it cost and what sort of limitations will the policy have. I have provided insurance for people with cancer, diabetes, suicide attempts, drug or alcohol problems, liver disease, lung issues, mental health issues, the list goes on. I have my coverage through a company that insures hard to cover individuals due to my diagnosis of Ulcerative Colitis at the age of 16. Now my coverage is slightly more expensive than the average person my age, but to me it is worthwhile. Again, anyone can get coverage, it is just a matter of matching the right product with the right person for the right price. A skilled advisor should be able to do that.

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I don’t want to make someone else rich

Well, aren’t you a bright ray of selflessness? The fact of the matter is that life insurance usually doesn’t make someone rich. This isn’t those made for TV dramas where Matlock investigates a wife who poisoned her husband for the 10-million-dollar life insurance payout. Google Matlock anyone under 30. The truth is life insurance is not meant to make someone rich, it is meant to stop someone you love from being poor. It simply covers expenses that pop up upon death like debt obligations, final expenses, and the biggest of all, loss of income. Yes, even you person who makes 40K annually will make 1.5 million in his lifetime. That is worth something, especially to those that depend on your income to survive.

I have no money

Sure you do. I mean you are reading this article on something right? A phone? A computer? In your home maybe. While sipping coffee, or a beer. Maybe while eating lunch. Maybe while ignoring your significant other while she watches the Real Housewives of Transylvania. The point is you do have money. Everyone has money. The issue if you think you don’t have money, is you more than likely prioritize your money poorly. No offense. This is not a jab at you, it is simply an effort to get us to think differently because I have been there too. I have mentioned how cheap insurance can be. Quite frankly if you don’t have money because of lower-income, debt, large amounts of monthly payments because of how expensive life is, doesn’t that mean your need for life insurance is greater? Logically more is riding on the little amount of money you do have available to you right? I have a client who is on government assistance, roughly $1250 monthly, and buys cheap term life insurance, and even puts away $25 a month for her son’s future. She has money. So do you.

Term vs. Whole Life Insurance: How to Choose – NerdWallet

I don’t have kids

Neither do I. Kid-less adults unite! Since we don’t have kids, that means we have money, so that excuse is gone. Many people who don’t have kids believe they don’t need coverage because no one depends on them. There are many reasons to get life insurance, but my primary reason for young kid-less people to get it is to get themselves into the right mentality. If you can get into the mentality of putting money away into something that you may never use, such as life insurance, retirement money, disability insurance, an income property, you will be wealthier beyond your wildest imaginations. It is this mentality that makes the richest people rich. There is no path to wealth with an “instant gratification mindset” and life insurance is the cheapest way for you to “adult-up” and quite simply handle your business.

I have workplace coverage

That’s good. I highly doubt you plan on working forever so that coverage will eventually end. Also, workplace coverage usually gives you a multiple of your salary, 1 or 2 times your income. Is that enough? Also also, workplace coverage can often take time to payout. Personal coverage can get money in your loved one’s hands in as little as a week. Also also also, the cost of workplace coverage goes up annually, so if you have purchased additional blocks of insurance, that price will change over time. You can lock in the price of personal coverage for as long as you like, including for your whole lifetime. Finally, with the rate people change jobs these days, on average every 5 years, you will always be worried if your next job’s group plan covers you as you desire, or at all period. When you own your own coverage this never has to come into play. You can instead focus on health and retirement benefits in your job search.

I have mortgage insurance

I am on a mission to get EVERYONE who has mortgage insurance to drop this BRUTAL form of coverage immediately. It is literally a pile of garbage. Mortgage Life Insurance protects the lender, ie. the big bank you got the loan from, and not you. When you die, the balance of your mortgage gets paid off, maybe, and the bank no longer has that debt on the books. I say maybe because mortgage life insurance uses what is called “post-claim underwriting”, which means they investigate whether or not they should have covered you when you die. Shouldn’t they have done that when you applied for the insurance? This can lead you to think you are covered when in fact you are not. That’s troubling. Also troubling is the fact that as your mortgage decreases because you pay every month, the level of coverage you have does as well, until it eventually disappears. You still pay high premiums every month even though your coverage is less and less. Shouldn’t your price every month go down as well? Look at your mortgage statement. This form of coverage is not cheap, and it may or may not even cover you at all. Get cheap, easy to obtain, effective, dynamic, personally owned term life insurance instead.

5 Reasons Why Mortgage Insurance Is a Rip Off – Young and Thrifty

I hate insurance salesmen

Good, me too. The sad truth is, life insurance salesmen get a bad rep for a reason. I know because I work around them. But aren’t you one Joe? Yes, yes I am. Like any profession, there are good people and bad people. One thing that life insurance has as its main issue is that we get compensated based on the size of the policy you buy. For instance, a policy that costs you $20 monthly pays me X, whereas a policy that costs you $100 monthly pays me 5X. That is some great incentive to sell you something that costs more. This is why you need to be educated on life insurance. Shady people, working for shady companies will come at you with confusing products with ridiculous features that take a huge chunk of your wallet every month. In life insurance there are 2 main factors:

1) The need

2) Your budget

I have already established that everyone needs life insurance, quite well I believe in fact. Now your budget is the only major issue. You may have the best life insurance policy in the world, but that means nothing if you cancel it because it is out of your budget. Your life insurance advisor should believe this as well. There is a time and place for comprehensive life insurance products and that is usually not applicable for the average person. The average person needs a big number on top of their head that costs them very little per month or as little as possible. Don’t let some slickster in a suit confuse you into believing otherwise.

 

Joseph James Francis is a Financial Advisor and Money Coach based in London, Ontario, Canada.

Thank you for reading my post on life insurance. If you would like to discuss your coverage options please reach out to me or book a no-obligation meeting.

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How to Retire Relevant Step 4: Insurance

Email – joe@budgetboss.ca 

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