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Life Insurance Basics: Part 1

Let’s understand the most important part of acquiring life insurance…

“Nothing gets me excited to get out of bed like the thought of buying life insurance” …. Said no one ever. In my almost ten years involved in the life insurance business I have yet to hear someone share a sentiment like this one. Many people approach insurance as a necessary evil, and in some instances, it is mandated to them by government. More often than not people are buying the wrong types of life insurance because they have been attracted away from its original purpose of protection and have been enticed into thinking that it could help them retire one day, be a self-funding entity or any of the many other hallucinations that salesmen have come up with to force a closed deal across the goal line. Many of these tactics have unfortunately put a terrible taste in the mouth of consumers who badly need to know the merits of having adequate life insurance coverage. The statistics outline the great need of life insurance among Americans:

Over 61% of Americans have life insurance coverage but almost half of life insurance owners (47%) have $100,000 or less in coverage.

When the average home mortgage runs just over $200,000 you don’t have to be a math whiz to understand the dangerous shortfall facing families in our country if something terrible were to happen to an income producing member of the household. Death is one of the leading causes of foreclosure in the United States yet the financial impacts of losing an income producing member of the household can be completely avoided by taking the proper steps toward adequate protection.

Where to start…

Whole life, Universal life, Indexed Universal life, Current Assumption Universal life, Survivorship life, Term life insurance, Return of Premium term life, Final Expense life insurance, guaranteed issue whole life, Variable Universal Life insurance, life insurance with a critical illness rider or a long term care rider or a child term rider or a waiver of premium rider, and on and on and on…. Geee I just can’t figure out why people don’t get life insurance! The industry has been flooded over years and years with every kind of iteration of life insurance one can think of. It is an endless repackaging of a very simple contract between a person and a carrier based on one easy to understand premise:

I pay a small amount of money and in turn, you [insurance company] promise to pay someone else a much larger sum of money if I die.

That’s it! If somehow you find it to be something different then you are missing the whole purpose of it. Now don’t get me wrong there are other features and benefits of the agreement one may end up getting and I don’t think they are inherently bad but the statistics show that the original purpose of protection against an untimely death (never heard of anyone having a timely death) has largely been lost on an under-insured population. Get this protection to protect against loss FIRST and then evaluate its other components.

So, in conclusion, life insurance is the best way to replace ALL the financial contributions, both present and future, a financially relevant family member will plan on providing but can’t due to their unforeseen death. And on that cheery note… yes, like I said in the beginning, not much excitement to this aspect of planning but no argument that it isn’t incredibly important to get right. Once you have the first part of this down pat then you may proceed to the next part which is diving into the different available types of life insurance. In my next blog post I will explore the different types of life insurance available.

Thank you for reading and contact us to learn more about how we approach the important task of adequately insuring households against the unexpected.


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