By Roberta L Nestor
Years ago, when young couples married and bought a home, the first thing they did was get life insurance, just in case. Whether you are a two income family or one, it is unlikely that a surviving spouse would be able to continue mortgage payments if the primary wage earner were to pass prematurely. A further need for life insurance happens when children are born, again, just in case. How would a surviving spouse who is just starting their career be able to afford college if the primary wage earner were to pass?
So, why is it that 82% of people agree that they need life insurance and yet only 62% actually have it? Studies from LIMRA’S Life Insurance Barometer are startling: Only 44% of U.S. households had individual life insurance as of 2010 which is a 50 year low. In 1960, 72% of Americans owned individual life insurance. Further, 70% of U.S. households with children under age 18 would have trouble meeting everyday living expenses within a few months if the primary wage earner were to die today.
The bottom line is, most people think life insurance is too expensive. This could be more of a perception than a reality. Millennials, for the most part, are living healthier lives than their parents did at their same ages. Non-smokers who are committed to diet and exercise is a lifestyle choice for many young adults, especially those with children. With life insurance, you are rewarded for good health in the form of being issued as a “preferred status”. One thing that has not changed with life insurance is that the younger you are and the healthier you are when you purchase it, the least expensive it will be.
Now, to debunk the myth that life insurance is too expensive! Certainly traditional whole life or universal life (think permanent insurance) is much more costly than term insurance. For most young families term insurance makes sense because it is affordable. For example, for a preferred 30 year old male purchasing a 20 year term policy with a $250,000 death benefit, the premiums could be anywhere from $155 – $175 a year, depending on the insurer.
Underwriting for policies has changed over the years. Having a sibling or parent of the proposed insured that either died from or has been diagnosed with cancer or cardiovascular disease prior to age 65 can negatively impact the premium. Even your driving record has impact. If the proposed insured has had more than 3 speeding tickets and/or moving violations in the past 5 years; or any DUIs, license suspension or revocation you could also end up paying more. That same policy above for a 30 year old male with these 2 conditions (and otherwise preferred health) could raise annual premiums from $155 a year to $268 with the same insurer.
While shopping for life insurance on-line might be convenient, it’s not necessarily the best route. Working with an advisor who can shop for you and understands the underwriting process can save you time and they can also work with you to determine the right amount of insurance needed. Income replacement, mortgage liabilities and having money for college education are all critical to your new family.
Another detractor of buying individual life insurance is because it is often an employee benefit with employers. Even though you may currently have life insurance through your employer, there is a strong likelihood that this generation of job-hoppers will have multiple employers throughout their careers. Employer benefits can change – we’ve seen that with our health insurance benefits, what was once standard to be free, is now costly. Your best bet is to have your own life insurance and to protect your family while you are young and healthy!
Roberta L. Nestor is a financial advisor practicing at 491 New Haven Avenue in Milford, CT offering retirement, long term care, investment and tax planning services. She also offers securities and advisory services as an Investment Adviser Representative of Commonwealth Financial Network – a member FINRA/SIPC and a Registered Investment Adviser. Fixed insurance products offered through Nestor Financial Network are separate and unrelated to Commonwealth. Commonwealth Financial Network or Nestor Financial Network does not provide legal or tax advice. You should consult a legal or tax professional regarding your individual situation. Roberta can be reached at Nestor Financial Network, 203-876-8066 or firstname.lastname@example.org.