As promised yesterday in reference to the Top 5 reasons people don’t buy life insurance they know they need, one of the reasons cited was “Have other financial priorities”. The bottom line, and I have this discussion almost every day with clients, is that budget absolutely has to be taken into consideration.
If I’ve said it once, I’ve said it hundreds of times. If it doesn’t fit in your budget, it won’t stay in force. If it doesn’t stay in force it won’t be protection for your family.
We all have financial priorities and I suspect on some level most people would like to make their life insurance one of those priorities. So, does life insurance really cost so much that it can’t be budgeted into an average families budget? The quick answer is not, it can be worked comfortably into most budgets, but let me give you an idea what happens.
It starts with an insurance agent that has their own agenda, primarily making tons of money. You really want $500,000 worth of insurance, so the agent quotes you $500,000 worth of whole life or universal life or some very expensive option. Let’s say he comes at you with an idea that is $400 per month. It’s more than your car payment. It’s more than you pay for utilities. It’s more than it would cost to have your child go to a private school. Well, the answer to that agent is that you “have other financial priorities” and can’t afford it.
The need for the insurance is still there but a greedy agent has just priced you out of the market. So, the agent, in an effort to save the sale will start lowering the face amount until he finally gets to something you can afford, say, $90 a month for $100,000 of whole life. He sticks with the original product because of the commission structure, not because it’s the best thing for you.
An independent agent with your best interests in mind would be sensitive to both your need and your budget and would probably recommend that you stick with the $500,000 and go with a 20 year term for about $70 per month.
Sorry, I got off chasing rabbits and got a bit off subject. Why do people drop their life insurance? Because they were SOLD a policy that didn’t really fit comfortably into their budget. When things get tight and you’re not dying, life insurance policies are one of the first things to go.
Bottom line. When you have financial priorities, determine how much you can comfortably budget without touching those priorities. Don’t let anyone sell you out of your price range.
This post is somewhat dated. Life insurance underwriting is changing and evolving continually. For more updated information check out some of the key word links. If you have a specific question or topic you need information for do a search. If you don’t find the answers you need contact me and we’ll make sure you get the information that is important to you.