I know over the past few years thanks in part to Dave Ramsey and also in part to a reality check in the economy, I’ve had to take a new look at my budget several times. The days of paying more than we need to really are over.
The same thought process couldn’t be more true when it comes to your life insurance portfolio. There are three primary reasons why you may be paying easily twice as much as you should and very possibly four to five times what you need to.
1. You were talked into buying permanent insurance for a temporary need. Cash value whole life and universal life policies can be 3-4 times more premium than a 20 year term insurance policy for the same amount of coverage. If you have permanent insurance, have a serious talk with your spouse about a truthful answer to the question “does your life insurance need to be permanent?”
2. You simply used the wrong agent who used the wrong company. For instance if both of your parents died prior to age 60 of cancer, most companies would approve you in a standard rate class due to family history which, just quickly, for a male age 50 in otherwise good health wanting $500,000 of 20 year term would cost a little over $1700 annually. But if you used an independent agent who knew the myriad of underwriting niches, you could have had the same policy from ING Reliastar for just barely over $1000 a year.
3. You bought your life insurance from your old friend, your auto and homeowners agent. He pointed out to you that by placing your life insurance business with him you would get a discount on the entire package. What you weren’t told was that the discount is nowhere near enough to cover the difference between paying a fair price on your life insurance and paying what, for instance, Farm Bureau would charge.
I often stop by businesses and simply ask the owner if they would like a comparative quote just to make sure they aren’t paying more than they need to for their business life insurance. 4 out of 5 business owners are paying too much. A lot of them know it without even doing a comparative quote. Some of them, and I understand this while disagreeing with it, choose to continue to pay too much because they bought it from someone that they don’t want to offend by replacing their policy with a better value. It just seems to me that every life insurance agent should want nothing more for everyone in the world than for them to have life insurance and have it be the best value available.
Bottom line. This down economy has brought a real gut check into our spending habits and our budgets. That’s a good thing but it often means some tough choices. You may have to tell your car insurance agent that you’ve found better life insurance than he has to offer. You may have to shop a bit longer for your life insurance to make sure that the right agent uses the right company for you. You may finally have to come to grips with the fact that whole life insurance is not the best product for you and tell your agent that.