You’re at a party. You’ve just met a really attractive man or woman (your choice). You’re fascinated and intrigued until the conversation turns to careers. The object of your attention mentions that he/she is a life insurance agent, hands you a business card and suggests the two of you get together to discuss policy options. You:
- Enthusiastically agree -- it’s something you know you shouldn’t put off any longer
- Pretend to choke on your hors d’oeuvre and run for the nearest exit
If you picked option 2, you’re not alone. Most people don’t relish any kind of sales pitch. But when the product is life insurance, folks really shut down, especially if they’re members of Gens X and Y -- people born between 1966 and 1994 -- the very people who stand to benefit most from life insurance. According to a Life Insurance and Market Research Association survey, over 30 million households in that group admitted they needed more life insurance and most of them believed life insurance provided peace of mind. So why don’t they buy?
There are lots of reasons and excuses. Some are well-founded and some are just plain irrational. See if any of these sound like excuses you’d give that hypothetical life insurance agent at the party.
While there is no lack of marketing and education information online that attempts to explain the various life insurance products, people remain confused. In the research survey cited above, 12% of respondents said they couldn’t decide what type of life insurance to purchase, 10% feared making the wrong decision and 8% gave up because of a lack of knowledge. If you fall into this category, experts recommend that you first focus on whether you need life insurance and why you need it before you worry about what kind to buy.
- Do you even need life insurance? The easiest way to answer this question is to ask yourself who you’d name as the beneficiary. If you’re young, have no one who depends on your income, and no business responsibilities, you probably don’t need life insurance. On the other hand, if you have a family or plan to have one soon, life insurance premiums are much cheaper, and more available, when you’re younger. And buying a policy and paying the premiums religiously will maintain your insurability as you age.
- How much do you need? You’ll have to calculate how your survivors would cope without your income (factor in all monthly expenses and
long-term savings goals like college for the kids) and for how long.
Once you have a handle on your needs, you can start thinking about the right life insurance product. There are essentially two kinds: term and cash-value.
Term life insurance generally offers cheaper premiums, but it typically only pays out benefits if you die. Stop paying the premiums and you lose whatever you’ve paid in. Some term plans can be converted to cash-value policies at policy maturity.
- Cash-value policies are more complicated. They come in three basic types: whole life, universal life and variable life. Essentially, all of these build up cash over time like a savings account, which you can borrow against or cash out at policy maturity.
Within these simple categories you’ll find many variations. The more time you’re willing to invest in learning your options and the pros and cons of each product, the more likely it is you’ll find the product that meets your needs and budget.
I can’t afford it
Life insurance is easy to blow off, especially when you’re young and have other priorities competing for your hard-earned dollars. Just remember that premiums will not get cheaper as you get older. It may be to your advantage to buy a small policy now and add onto its value as your income grows. At least shop around (you can easily compare life insurance policies online without ever talking to Mr. or Ms. Life Insurance Agent). Industry experts say life insurance products have come down in price since the big recession of 2008; you may be pleasantly surprised at what you can afford.
The process is tedious
This is a common complaint, but the industry is embracing technology to take as much of the tedium as possible out of the process. In addition to shopping for quotes online, you can start the application process online and complete it over the phone. E-signatures and e-notarization, if needed, save you precious time, trips and stamps, too. Your policy can be sent to you via email or downloaded from the insurance company’s website. No more need to remember where you put all that paperwork, either. It’s safely stored electronically.
I don’t want to think about dying
Who does? But, as we already discussed, if you need life insurance it’s not about you, anyway. We’re all going to check out sooner or later. Life insurance is about providing for the people you’ll leave behind. Knowing you’ve got that covered should give you a warm fuzzy feeling.