Archive for June 15th, 2009
The carefree life of the young and single! Been there and done that, and I don’t believe I was the odd person out when I failed to plan for the future. My assumption was that if things changed I would deal with it as it came up. That included any thoughts about life insurance. Why buy life insurance when for all I cared, if I passed away, someone could just put me out with the trash on Wednesday?
The simple answer to that is that no one will put you out with the trash, so let’s be real. It will cost someone something to get rid of the body and while you’re planning ahead, rather than just blowing it off because you’re dead, why not leave a little behind to pay off your debts?
The real issue when you are young is wrapping your mind around mortality. But if we really think, in our 20’s and 30’s and 40’s, not a lot of time passes between the news we hear about friends or family members in our own age group dying suddenly, prematurely. It just seems so out of place, but statistically it really isn’t.
For the single woman I suspect this is easier to wrap your mind around than it is for a single man. It’s been my take on the situation that woman actually develop brains at a much younger age than men. So, why life insurance when you’re young?
Although it may seem like an unneeded expense right now, it would be very odd indeed that you will make it out of your 30’s without having a genuine need for life insurance. To purchase it before there is a need is actually a prudent move, as the younger you purchase life insurance, the more you can get and the longer you can lock it in for, at costs that you will never see again simply due to age.
In my last several posts I have covered a number of areas where women need life insurance. In each of those instances there would have been a benefit to planning ahead and owning that insurance at the lowest possible price.
I won’t try to interject rocket science into this idea. My recommendation would be to take out some reasonable amount of insurance based on your current situation, where you think you might be headed, and of course, your budget. Remember, this only works if it stays in force, so budget is critical. I would recommend a 30 year return of premium term. This provides the most options down the road.
Again, budget is key so if straight term insurance works better, something is always better than nothing.
Bottom line. Buying life insurance when you are young, single and healthy is a prudent thing to do. Buying young offers you the most options at the best prices. Buying while you are single is a wise planning move. Buying while you are in good health speaks for itself.
June 15th, 2009
This is a subject worthy of revisiting. Men especially, but women also, underestimate the need for life insurance in almost all scenarios. Even when there should be no other assumption than exactly equal we somehow manage to come up with the wrong answer.
If we say for for simplification sake that a husband makes $50,000 a year and they have determined that the correct amount of life insurance is 10 x his annual income, he needs to carry $500,000. If his wife makes $50,000 they should use the same formula and come to the same result, but all too often her contribution to the family income is discounted and they assume they don’t need as much life insurance on her.
For that reason I will be looking at life insurance, it’s need and it’s impact, for women in various roles. Let me be very clear that I have no bias that leads me to believe one role is better for a woman than another. I would hope for all women that the path they choose is fulfilling.
I live in a two income household. Our children are grown. While I have done well with my insurance business, my wife has done equally well as a business owner of multiple Curves franchises. Before that she was a nurse and brought in substantial income. She is an integral player in our life budget and our plans for the future. If she died prematurely with no or inadequate life insurance, my ability to continue on would be damaged. She has already been through a premature death of her first husband and fully understands the economic hardship that happens when a household goes from two incomes down to one.
Having life insurance is all about whoever is left behind having choices. In most cases, with little or no insurance, all of the choices would be steps backwards. I might have to sell our house and downsize. If I sold the house, since my office is on the same property, it would affect my business. I might have to liquidate assets to make up for the lost income. My lifestyle would have to change since we always combine income for things like vacations.
If the process of figuring out how much life insurance is adequate for a man works, the same process should be followed for women. Don’t get trapped into old ways of looking at the subject. A rule of thumb when I first started in the business was that a wife should have about half as much insurance as the husband. While that rule of thumb was left behind some time ago, in a way it still lingers. Men, on average, carry almost exactly twice as much life insurance as women.
Our wives face the same perilous path through life that we husbands do. While statistically they will outlive us, we never know when they will fall victim to one of the leading causes of death for women today.
Bottom line. In almost all two income households, the loss of one of the incomes is huge. Each income should be analyzed not just by it’s monetary size, but also for what it accomplishes. I think we probably all know couples where, for instance, the husband makes $50,000 and the wife makes $30,000, but more of the bills are paid from the wife’s income and more money is blown from the husband’s income. In a situation like that, the loss of her income might very well be more damaging than the loss of his income.
June 15th, 2009
There is a real tendency in the whole conversation about life insurance to leave women out of the conversation entirely or at best to make them an “add on” thought.
The truth is that as almost all families either are or are becoming second income dependent, and more families are finding that the woman are at least equal, if not the primary breadwinner, and that real tangible value is recognized in those women who are able to choose raising a family, and more woman than ever women are business owners or business executives, well, let’s get real. The playing field of life insurance need is level and somehow half the players are being left off the roster.
I wrote a series of posts aimed at rolling some of the bumps out of the playing field sometime back, and over the next couple of days I will be dusting those off, updating them and reopening the a conversation than never deserved to be on the shelf.
The first post in that series was a take on life insurance for your spouse using my wonderful bride as an example.
“Last year when my wife and I reassessed our life insurance portfolio, I recommended that we add another policy for both of us. She understood very well why we should it increase it on me. The business had grown, and there was simply more at stake if I were to die. She has since gone through several phases, all of which called for continued evaluation of how much life insurance is appropriate for her. She owned several small businesses at one point, then sold those. She has always managed rental property we have and has been an integral part of my business and now she has returned to nursing. At this point it would be arguable that her income and value might be harder to replace than mine.
Anyway, back then my answer was simply this. The price of property in Belize has gone up! Actually a standing joke, broken down into logic, it’s an accurate answer. A long time ago she asked me what I would do if she died. I told her then that I would likely settle our financial matters and, having no children at home, run away from everything, and Belize would be my first choice of a place to settle for a while.
The death of a spouse is traumatic at the very least. And, while ultimately we might not make any huge changes, it causes a lot of surviving spouses to re-think where they were headed. It could be that you have kept a job that you weren’t horribly in love with because it kept the bills paid and provided for your family. It could be, like me, that your wife is a part of your business and a breadwinner in her own right, and there would be a financial as well as emotional loss if she died.
Whether I would really go to Belize or not, who knows. We’re going there in November for her birthday so I’ll be able to assess then whether it is all just a fond memory (our honeymoon and two other visits) or still a plan of action. I certainly hope I get to spend many more years visiting Belize and other places with her, but at least if you have adequate life insurance on your spouse, you have choices.
In subsequent posts I will be covering all aspects of life insurance for women. After all, they’re not all married. I will lay out my thoughts on life insurance for single women, single mothers, stay at home mothers, working wives and mothers, and women who own and run businesses.
Bottom line. No different than men, where you have a responsibility, you have a need for life insurance. Women in general outlive men, but when it comes down to the reason that most life insurance is purchased, premature death, men and women
are on pretty equal ground.”
June 15th, 2009
I know I have beat the subject to death and beat up on other agents who don’t beat the subject to death, but allow me to begin this Monday by sharing with you the actual cost of dragging your feet.
This particular example actually is a long time friend of mine who has trusted me with their family life insurance for some time. On an annual review this year we looked at the two term insurance policies he had in force, a $200,000 20 year term that was 5 years old and a $400,000 20 year term that was 3 years old. The total annual premium for the two policies was $1890 annually, a bit high because when he bought the first policy he was still chewing tobacco. While we did get him non smoker rates, they weren’t as good as his health would have earned him absent the tobacco use.
Now, three years out from quitting chew, in great health, there is every reason to believe that he would qualify for preferred plus rates from Banner Life. I presented the idea of replacing both policies with a new $600,000 20 year term with Banner for a total premium of $1790 annually, a $100 a year savings and a brand new 20 year term length.
This was back in late March. They drug their feet on the decision to make the change and finally decided around the first of April to go ahead. Same coverage and a longer term for less money finally sunk in. So I sent an application and ordered an exam. Right after he missed the first exam and had to reschedule we got word that Banner was having a rate increase, so I let him know that there was a deadline to the rates I had quoted and he agreed to get the job done.
I’m never pushy about the process, but I definitely kept him abreast of where he stood with the impending rate change. Well, long story short he drug his feet right past the deadline, one of those no second chances, you snooze you lose deadlines, and the $1790 he was hoping to get suddenly became $2028 annually. It went from no brainer savings to, although not much, an increase in his monthly outlay.
Bottom line. Agents everywhere should be talking to their clients about where they stand with their policies every year. A policy shouldn’t be a final document, but the beginning of a long term conversation. I know the deadline thing has been abused by some agents, but if you have any doubts about the integrity of the advice, ask the agent to provide you with a copy of the company announcement and rules for the rate change. Anytime you can save money and increase your life insurance amount or term length, jump on it like a chicken on a grasshopper.
Disclaimer. I’m back in the chicken and egg business after a 2 year hiatus so forgive the Colorado country colloquialisms.
June 15th, 2009
