There’s no denying that the recession has played havoc with the household budget of most Americans. Income has gone down as prices have gone up, with “robbing Peter to pay Paul” a frequent, if undesired, activity each payday. As times get tougher, you may be looking for ways to get your budget under control, evaluating each line item to see if it can be reduced or perhaps even eliminated.
While there may be some places to cut back, your insurance coverage shouldn’t be one of them. If you are considering canceling your life insurance policy to add a few more dollars to your bank account, consider these points:
Chances are when you took out the policy, you were in good health. Can you guarantee that the same will hold true a few years from now, when you decide you can afford to buy insurance again? If an unexpected illness occurs, insurance coverage may no longer be an option.
If you’re between 25 and 44, you might think you have plenty of time to worry about what would happen to your loved ones when you die. But according to the CDC figures for 2010, approximately 112,178 of those who died were in that same age bracket, with accidents responsible for more than 34% of them.
However, knowing all the reasons to keep your policy in force doesn’t solve the economic issue. But a meeting with your insurance advisor could provide you with a few options. Start by discussing the situation, and whether it’s a temporary issue (you’re between jobs, for example) or something more serious, such as a terminal illness.
In the latter case, your policy may allow you to take advantage of an accelerated death benefit, where you can draw some or all of the death benefit to handle current expenses, with the remainder provided to your beneficiaries upon your death. This can be very useful if you are unable to work and your loved ones depend on your income to pay the mortgage, for example.
Other possible solutions, depending on your situation, may include borrowing against your policy or allocating its cash value to pay the premiums, thereby keeping it in force. (Keep in mind this could reduce its cash value and death benefit amount.) Some policies come with flexible premiums, allowing you to pay more or less, or even skip premiums. Even changing how you pay the premium—monthly or quarterly rather than on an annual basis—may give you a little breathing room.
Other alternatives suggested by the Oregon Insurance Division website include converting your policy to a paid-up policy, reducing the death benefit to lower the amount of your premium payments or even asking your beneficiaries to help pay the premiums so they can keep the financial protection you want for them.
Once you and your advisor have decided on a workable solution, it’s time to take a hard look at your overall household budget. Look for areas where you can shave a little from your outgo and save a little more for unexpected expenses. It’s what money guru David Bach refers to as the Latte Factor—taking the money spent on unnecessary “little” expenditures and putting it into your savings account. Just $5 a day—the price of a latte in most areas—can add up to an impressive $1,825 a year stashed away for a rainy day!
The key is to make the right choice not only for the immediate future but also for the long term. You made a wise decision when you purchased your policy. Make another smart solution to keep it in force—for you and those you love.
Life insurance is nothing if not personal. It pays money to widows, widowers, children and family members when a loved one dies, to help them continue on financially.
However, we hear a lot of talk from Capitol Hill about the life insurance industry not serving the American public. Few of us, including those on Capitol Hill, understand the true economic benefits the life insurance industry provides Americans. According to the American Council of Life Insurers (ACLI), there is almost $18.5 trillion of death benefit coverage currently in force. That means that $18.5 trillion, yes trillion, would go into the hands of families, if something were to happen to the policyholders. This sounds like a tremendous amount of protection that life insurance is providing Americans to protect families and businesses, to create legacies, to create money where none existed before.
These are promises to pay future benefits, but what is the life insurance industry putting into the economy today? According to ACLI, total payments made under life insurance and annuity contracts were $365.6 billion in 2010. That is over $30 billion in cash per month coming back into the U.S. economy. I don’t know how you do your math, but even in government terms, this is a lot of money.
With high unemployment numbers a seeming constant, what about the people that the industry employs? ACLI’s 2011 Fact Book states that there are 917 companies doing life insurance business in the United States, employing more than 2.2 million people. In addition, employment in the industry has remained fairly constant over the past 10 years.
As an agent and an advisor, I’m proud to help protect my clients’ best interests and proud that the life insurance industry contributes to a stronger and sounder economy and country.
Greg and Melissa Knoll were college sweethearts and got married shortly after graduation. Young and active, they were excited about the possibilities the future held and happy to be sharing the journey. While in their mid-20s, they began making that future concrete by buying a home and planning a family. They realized it would be a smart idea to talk to their insurance agent. It’s a good thing they did, as life had an unexpected path for them to take.
Melissa tells her own story much better than I could, so please watch.
Whenever I watch this video, I think of the great sadness that must have enveloped their family. It’s hard not to cry. But I also think of Melissa’s words and wonder if it’s a small silver lining: “I hope a young couple sees our message and it pushes them from the heart to make a decision that is going to take care of their family.” I hope so, too.
My first year managing the LIFE Lessons Scholarship Program, I was introduced to Giavanna Ficarra. As I watched her video submission to apply for a college scholarship, I remember feeling so sadden by her story. It brought tears to my eyes to hear that her father, who was a land developer, was shot and killed, leaving behind his three daughters. To make matters worse, he hadn’t renewed his life insurance policy.
Every time I watch it, I’m reminded how life shattering it can be when a parent dies and there is no financial support for those left behind. It’s traumatic enough for teens to lose the most significant person in their life, but then to have to worry about all the financial stresses ahead of them is devastating. Gigi said if her dad had had life insurance “things would have worked out differently,” and I agree. If he would have had coverage at the time of his premature death, then she might not have lost that sense of stability and security she talks about in her video.
The LIFE Lessons Scholarship Program receives hundreds of these stories every year. It’s a program where college bound students submit a 500 word essay or three-minute video describing the emotional and financial impact of losing a parent at a young age, and how the lack of life insurance played a role in their families’ finances.
The goal of the program is to help students obtain a college degree, while sharing the reality of the consequences when there is not enough life insurance or none at all. As you can imagine, these stories are powerful and heartfelt, and leave an everlasting impact.
Over the past seven years, the LIFE Foundation has provided scholarships to almost 300 students. Although these young adults have been faced with a devastating loss, they are remarkable in their determination. They understand how important education is and strive to obtain a degree. If their parents had had adequate amount of life insurance coverage, they might not have had to struggle as much as they did. And while they learned the hard way, they also understand how important it is to protect your family should the unthinkable happen.
In the words of one of our LIFE Lessons students, Brittnee Clary, “Although the hurt and pain caused by losing my dad can never be eased by any amount of money, if my dad had had life insurance, it would have allowed us to concentrate more on each other during this dark time rather than on financial issues.” Far too often it’s a reoccurring theme.
I encourage you to read a few of our LIFE Lessons stories, like Chezeria Ortiz’s, and think about the people you love. If anything were to happen to you today, would you have the comfort of knowing they would be taken care of?
For more information about our LIFE Lesson’s Scholarship Program or for an application, click here, and then please share it with people you know in your community. The deadline to submit an entry is March 12.
If you would like to donate to the program, please click here.
Statistics are just numbers, until they hit home with a personal story, right? I read a Pew report recently that said marriages in the U.S. are on the decline. Barely half of adults—just 51%—are married, and those who are marrying are doing it later. Then I started thinking about the decline in the sale of life insurance, and I began to wonder if there was a link.
Here’s how it gets personal. My son is 30 years old. At his age, I and most of my friends were married; some of us had children as well. But my son has taken things in a different order, which is common today. He bought a house (a great, responsible thing to do) and his long-time girlfriend has now moved in with him. They are a family unit in all senses but the legal, married kind.
They have taken on the responsibilities of caring for a home and the melding of two lives. But without that legal commitment, is there really a financial commitment—or at least a mindset of financial commitment?
I think in many cases, including my son’s, the answer is no. Of course they are committed to the relationship, but what if “life happens”? What if something were to happen to my son (God forbid!)? Where would that leave his girlfriend financially? My husband and I are currently the beneficiaries of his life insurance policy. The home he bought is in his name. That means between the proceeds of the life insurance going to us and his home being sold to pay off the mortgage, his girlfriend could be left without a place to live. Of course that would never be my son’s intention. But that’s the point. We don’t intend for bad things to happen, but sometimes our inaction causes them.
For my son, it could be as simple as changing the beneficiary on his life insurance policy. But for many other young couples, it means sitting down, asking the hard questions and getting the life insurance coverage they need.
There are no moral overtones (or undertones) to this post. My son and his girlfriend are happy, which makes his parents happy. This isn’t about marriage per se, but marriage is one of the triggers to getting life insurance (as is having kids, getting a new job, etc.). If marriage is not there, then couples need to wake up to the reality of their commitment and insure their love with life insurance.
The new question to ask is: When does our financial commitment start?
Tell us: When did financial commitment start for you?
Americans. Income has gone down as prices have gone up, with “robbing Peter to pay Paul” a frequent, if undesired, activity each payday. As times get tougher, you may be looking for ways to get your budget under control, evaluating each line item to see if it can be reduced or perhaps even eliminated.
Gigi said if her dad had had life insurance “things would have worked out differently,” and I agree. If he would have had coverage at the time of his premature death, then she might not have lost that sense of stability and security she talks about in her video.