Debunking Excuses for Not Buying Life Insurance
By Ric Edelman
It’s necessary and cheap. So why is policy ownership at a 50-year low?
"You can’t always get what you want. ... But if you try sometime you get what you need.”
Would you believe that Mick Jagger was talking about ... life insurance?
OK, maybe not. But work with me here, people. Life insurance rarely tops anyone’s list of wants, but it remains high on your list of needs.
Yet ownership of life insurance in America stands at a 50-year low, according to the Life Insurance Marketing Research Association. Its Trends in Life Insurance Ownership study — conducted every six years, most recently in 2010 — found that only 44% of U.S. households have individual life insurance. Some 30% have none at all. One of the most jolting discoveries is that, among households with children under the age of 18, — the ones obviously most in need of protection — 11 million have no life insurance of any kind. Amazing.
It’s even more amazing when you consider that 93% of Americans agree that it’s important to have life insurance — even though nearly half admit they don’t have enough coverage, according to the Life and Health Insurance Foundation for Education.
I mention all of this because September is Life Insurance Awareness Month.
Before you flip to the next page, I promise to make this topic interesting for you. Consider, for example, the top reasons people cite for not obtaining the protection they need for their loved ones — and why those reasons (excuses, really) just don’t make any sense.
Can you guess the most common reason why people don’t have the coverage they need?
Surprisingly, the reason is not cost. Life insurance is cheap — one of the best bargains you can get anywhere. More about that later. No, the main reason people don’t own life insurance is ... procrastination. This confirms what I explain in my book The Truth About Money: Procrastination is the No. 1 cause of financial failure.
Read on to see what LIMRA says are the four top reasons — excuses — people cited for their failure to obtain life insurance or for not being adequately covered.
1 | “I just haven’t gotten around to it.”
That excuse will serve as a nice slogan on your tombstone. When your surviving spouse walks into our office, do you want him or her to be grieving, or to be grieving and scared?
2 | “It’s too expensive.”
Compared to what? A big-screen TV? A fancy car? Life insurance is not a luxury — it’s a necessity. And it’s never been more affordable. Prices are 50% lower than they were a decade ago. If you’re 50 years old, you can buy a half-million-dollar policy for about $3 per day. To be accurate, then, life insurance today is incredibly inexpensive.
3 | “I have other financial priorities right now.”
Those “other priorities,” according to LIMRA’s study, include paying off debt, paying their children’s college tuition bills and saving for retirement. But those expenses assume you won’t die. That’s not financial planning — that’s wishful thinking. Let’s assume you do have other financial priorities. Of those survey respondents who said this, seven out of 10 with children under age 18 admitted they’d have problems paying bills if the primary breadwinner died today. What about your household? If you or your spouse/partner were to die, would the survivor be able to pay the bills and keep supporting the household? When you look at it in this light, there are few (if any) financial priorities you might have that would trump the need for life insurance — especially considering how affordable it is.
4 | “I don’t know enough about it.”
You’re not supposed to know a lot about it. That’s what financial advisors like us are for. Knowing the ins and outs of life insurance is our job, not yours. Your assignment is to get the coverage you need — and you do that simply by calling us. That’s why we’re here; that’s what we do. So help us do our job. Let us help you.
Twenty-four percent of those surveyed said they’d like to do just that — talk to a financial advisor about life insurance, but eight in 10 don’t have an advisor and most said they’ve never had one.
In the survey, some expressed concern that an insurance agent might be more interested in fat commissions than in helping them. Fair enough. Here’s how to solve the problem: buy term insurance. The commissions on these products are a fraction of what agents earn when selling you whole life insurance, variable life and universal life insurance products.
So why is ownership of life insurance in America at a 50-year low?
Some theorize that there are fewer agents hustling for sales. After all, most people buy cheap term insurance these days, and the commissions paid on that product makes it hard to earn a living. Since insurance tends to be sold, not bought, fewer insurance agents translates into fewer insurance sales. That’s why we have Life Insurance Awareness Month.
At Edelman Financial, we routinely talk to our clients about life insurance —whether you have it and in a sufficient amount. But people who aren’t clients — people who don’t have a financial advisor — are like people who never visit a doctor. They don’t go because they know what the doctor is going to tell them: lose weight, exercise and quit smoking.
Only those who are ready to lose that weight and get in shape tend to set appointments for an annual physical exam.
So it is with our clients. They’re ready to get the recommendations they need, and they happily discover the process is not painful at all.
Some argue that there’s a 50-year low in insurance ownership because our population is aging; empty nesters don’t need coverage, right?
Wrong. Millions of retiree households need life insurance. Many have pensions that die with them, leaving surviving spouses at risk. Others are (still, or again) supporting adult children, whose own lives, due to a difficult economy, failed marriages or health-impaired grandchildren, have generated the need for financial support.
If your financial advisor hasn’t told you that you and your family are sufficiently protected, now’s the time to call.