Let me make something perfectly clear… again. Almost all life insurance is purchased to protect your family against an untimely death. If you knew when and how your death was going to happen it might render a lot of life insurance unnecessary, or perhaps more urgent. So, everyone who knows that information can probably skip the rest of my tyrade.
I had, or almost had, a client. He had a policy in hand. He was dragging his feet about putting that policy in force even though we had spent two months going over different scenarios and determining what he wanted to do. It took another two months to get a policy approved exactly like he wanted it. He swore he needed a permanent policy so that his wife would always have something to carry on with. It was only $50,000, but it was affordable, a universal life policy with a lifetime guarantee, and he felt like it really met a need.
Sometime in the fifth month, with his policy approved and in hand, he spoke with a “financial advisor” that suggested to him that, given the real estate market in their area, he would do far better for his wife if he put the $900 a year into his house rather than into life insurance.
Do you ever run into one of those things where there are so many things wrong, you just don’t even know how to start explaining it? Well, this one had me chasing that rabbit.
I’ve been remodeling my house since we moved into it 10 years ago. I can’t remember any year that I put anything as small as $900 into my remodeling account. But, let’s say in year one Mr Almost Client put $900 into new window blinds. And then he dies. His house will be worth about the same. And his wife won’t have any life insurance proceeds to bury his financially advised body.
OK. Let’s be optimistic and say he lives a long time. He religiously puts $900 a year into his house. It’s not enough money to have any real impact on the value of his house, so while the house may in fact go up in value, it isn’t because of the $900. The truth is, and anyone who has owned a house for any amount of time knows this, if you put $900 into your house this year, it is something that will wear out or go out of style within 10 years. That means you will need to start putting double that amount after year ten, triple year twenty, etc………. just to break even.
I’m not saying you shouldn’t do things to your house and I’m not saying there isn’t value to keeping your house up to date. What I am saying is that for a financial advisor to suggest that a person should do that, rather than provide a tax free life insurance benefit to their family is, and I’m really being kind with this……stupid!
I’ll bet this same advisor suggests using life insurance premium money to buy cars, and better yet, lotto tickets.
Bottom line. If you have a responsibility, and yes I will go on record as stating that being married means you have a responsibility, then you should have life insurance. Can you do better by putting money you would have spent on life insurance into your house? I’m not seeing it. The answer is no. Get the life insurance and then figure out what corners to cut to put money into your house, or investment, or cars, or lotto tickets. And if you run into this “financial advisor”, send their name to me so I can register it on www.youjustcantfixstupid.com.