We all know that the topic of life insurance can cause people’s eyes to glaze over when it’s brought up in conversation. It’s common knowledge that people don’t like to consider their own mortality. But, like the Boy Scout motto says, it’s best to be prepared. When given fair consideration, the benefits of life insurance often swoop in like a superhero — arriving just when you need them.
Life insurance coverage helps guarantee that life will go on. It’s about being able to pay for little Suzy’s piano lessons and Billy’s braces. It’s about having less to worry about. And it’s an additional tool that agents and brokers can help their clients use to build a life for themselves and their families. In fact, life insurance is so important that the entire month of September is dedicated to raising awareness about its significance.
Here are some common misconceptions about life insurance and its values and benefits, to help agents and brokers easily drive home the importance of this valuable financial security tool.
Misconception 1: Maintenance is not required.
While life insurance can offer tremendous peace of mind, you can’t assume that you can check the box on the form beside it and forget about it. Life has a funny way of evolving, and so too should one’s insurance coverage. Needs change; therefore, clients should periodically assess their life insurance policies to ensure that new needs are met. For instance, a term life policy purchased by a 25-year-old single man might not be the best option seven years down the road when he’s married with two kids. Policies expire, and appropriate beneficiaries can change. Your clients shouldn’t think that just because they’ve checked off the life insurance box they can put it out of their minds forever. It’s best to keep the dialogue going and revisit the issue annually to ensure the policy still works for the policyholder’s current situation, the policyholder is getting the best value for the premium and, most importantly, the policy financially prepares the beneficiary for the death of the insured loved one.
Misconception 2: Life insurance is only for those married with children.
Many people incorrectly assume that life insurance is typically for the married, middle-aged, suburban set. In actuality, life insurance can be a great financial tool for young, savvy, single individuals who are set on building an array of financial plans early in life that will pay dividends later on. Consider this: whole life insurance policies appreciate over time, so it may make financial sense to invest in a life insurance policy now while premiums are probably lower, as opposed to later in life when the policy may cost more and not have the same value as an older policy. For example, when purchasing whole life insurance, premiums typically remain fixed. So, purchasing a policy at a young age can help the policyholder lock in a lower rate, and the longer some policies are held, the more they can gain in cash value.
Also, no one lives in a vacuum these days. Single people also leave behind final expenses that can generate financial stress. In fact, the 2012 Aflac WorkForces Report1 found that 58% of U.S. workers don’t have a financial plan to handle the unexpected, and 28% have less than $500 in savings for emergency expenses (51% have less than $1,000). If a single person were to unexpectedly pass away, mom, dad or another loved one would ultimately be responsible for handling the funeral arrangements, which can cost an average of $7,755, according to the National Funeral Directors Association.2