Life Insurance Awareness Month
September is life insurance awareness month, below are all of the tips and tricks that I could fit onto one page.
If you have spent any time in front of a screen the last decade, you have most certainly seen advertisements from different life insurance companies. These videos of a happy older couple appearing to enjoy their retirement or the Gerber baby trying to feed you some information on the importance of starting early are trying to do the same thing - sell you life insurance.
This has to be one of the easier financial planning concepts to grasp, if you die, your beneficiary receives money. So do you really need to be sold on it?1
In January 2021, just 52% of consumers reported owning life insurance (e.g., individual, employer-sponsored, etc.), which is down from 63% in 2011.
Overall there are 102 million uninsured and underinsured Americans who know they need (or need more) life insurance coverage.
Forty-two percent of Americans say their household would face financial hardship within six months should a wage earner die unexpectedly — 25% would struggle financially within a month.
Now, this can get a lot more complicated but from a high level, this is what you’re trying to protect against. If someone is reliant on your income and you were to pass away, what would happen to them? How can you avoid it? Why isn’t everyone already doing it?
The top reason people give for not purchasing coverage is that it is too expensive. Yet more than half of Americans overestimate the cost of life insurance three-fold.
More than half of Americans (53%) say they haven’t purchased (or purchased more) life insurance because they are unsure how much they need or what type to buy.
A third of consumers believe they would have to pay taxes on a life insurance death benefit and 4 in 10 aren’t sure. The reality is the proceeds from a life insurance death benefit are not taxed.
Before we get started, you should know that these life insurance companies have been around for 100s of years. This is not like shopping for a car or a flight where you can find an amazing deal by waiting for a labor day special. They don’t run specials, everything is math-based for them to make a profit. That’s okay because they can afford to take the risk and deserve to be paid for it. You shouldn’t buy insurance to make money, you should buy it to protect yourself (and your beneficiaries) from risks you can’t afford.
Here is the cheat sheet for understanding how to shop for life insurance.
First, decide how long you need it. How long until you (or your beneficiaries) are financially independent?
Next, calculate how much you will need. Here is a cheat sheet:
Debt: Clear all of your debts.
Income: Replace the income that was missed.
Mortgage: Cover the mortgage.
Education: Meet any obligations you set out in your financial plan.
This is called a DIME Analysis and is one of the tools we use to help clients decide how much coverage they need to protect their families. When purchasing anything we always want to make sure that we are shopping around and that is why we are licensed with nearly 50 different insurance companies.
There are plenty of different products out there and our job is to help find the best one that fits your situation.
https://www.limra.com/en/newsroom/liam/