We all know that the topic of life insurance can cause people’s eyes to glaze over when it’s brought up in conversation. It’s common knowledge that people don’t like to consider their own mortality. But, like the Boy Scout motto says, it’s best to be prepared. When given fair consideration, the benefits of life insurance often swoop in like a superhero — arriving just when you need them.
Life insurance coverage helps guarantee that life will go on. It’s about being able to pay for little Suzy’s piano lessons and Billy’s braces. It’s about having less to worry about. And it’s an additional tool that agents and brokers can help their clients use to build a life for themselves and their families. In fact, life insurance is so important that the entire month of September is dedicated to raising awareness about its significance.
Here are some common misconceptions about life insurance and its values and benefits, to help agents and brokers easily drive home the importance of this valuable financial security tool.
Misconception 1: Maintenance is not required.
While life insurance can offer tremendous peace of mind, you can’t assume that you can check the box on the form beside it and forget about it. Life has a funny way of evolving, and so too should one’s insurance coverage. Needs change; therefore, clients should periodically assess their life insurance policies to ensure that new needs are met. For instance, a term life policy purchased by a 25-year-old single man might not be the best option seven years down the road when he’s married with two kids. Policies expire, and appropriate beneficiaries can change. Your clients shouldn’t think that just because they’ve checked off the life insurance box they can put it out of their minds forever. It’s best to keep the dialogue going and revisit the issue annually to ensure the policy still works for the policyholder’s current situation, the policyholder is getting the best value for the premium and, most importantly, the policy financially prepares the beneficiary for the death of the insured loved one.
Misconception 2: Life insurance is only for those married with children.
Many people incorrectly assume that life insurance is typically for the married, middle-aged, suburban set. In actuality, life insurance can be a great financial tool for young, savvy, single individuals who are set on building an array of financial plans early in life that will pay dividends later on. Consider this: whole life insurance policies appreciate over time, so it may make financial sense to invest in a life insurance policy now while premiums are probably lower, as opposed to later in life when the policy may cost more and not have the same value as an older policy. For example, when purchasing whole life insurance, premiums typically remain fixed. So, purchasing a policy at a young age can help the policyholder lock in a lower rate, and the longer some policies are held, the more they can gain in cash value.
Also, no one lives in a vacuum these days. Single people also leave behind final expenses that can generate financial stress. In fact, the 2012 Aflac WorkForces Report1 found that 58% of U.S. workers don’t have a financial plan to handle the unexpected, and 28% have less than $500 in savings for emergency expenses (51% have less than $1,000). If a single person were to unexpectedly pass away, mom, dad or another loved one would ultimately be responsible for handling the funeral arrangements, which can cost an average of $7,755, according to the National Funeral Directors Association.2
Misconception 3: There are no financial benefits for the living.
Whole life insurance can be a key element to a lifetime financial plan. With this type of insurance, policyholders have the option to borrow against it, borrow on a whole life policy’s cash value to help meet retirement needs, contribute to a down payment on a first home, pay college tuition or even address outstanding bills.
Many people don’t consider just how versatile life insurance can be and how it can make sense, no matter the personal situation.
Misconception 4: Employers will make sure employees are covered.
Another common misconception is that life insurance is a perk that an employer provides. Many employees may think: I don’t have to think about it because life insurance is part of my benefits package at work. In fact, LIMRA’s 2011 consumer studies show that, among adults who have life insurance, many are dependent solely on group coverage. In fact, for the first time, the percentage of adults owning group life insurance has surpassed adults with individual life insurance, and people insured only through group life insurance have the lowest average amount of coverage.3
Also, as employers respond to changes brought about by health care reform and these difficult economic times, many are decreasing life insurance policies or eliminating them entirely. These changes can leave workers with gaps in coverage, often unbeknownst to them. It isn’t uncommon for workers to believe their employer has provided them with life insurance coverage when, in fact, the employer has not.
According to LIMRA, the number of Americans who own life insurance is at an all-time low — just 41%. There may be an overarching perception that folks are more protected than may actually be the case.
Again, the key here is flexibility. We’re fast-paced. We’re full-throttled and highly caffeinated, and it doesn’t matter if you drive a Mustang or Sienna. Agents and brokers have a great opportunity to help people more comfortably build and lead the lives they choose. So yes, maybe the reputation of life insurance for some is still a stodgy, old, perfunctory benefit that paid for grandpa’s funeral. In reality, it’s so much more. “Strong,” “dependable,” and “adaptable” are the adjectives that describe life insurance. So, in honor of Life Insurance Awareness Month, let’s tip our hats to the benefits and protection of this valuable tool.