Most people wondering if they should buy life insurance are primarily concerned with spending money that they are not sure they need to spend.
The good news is, the team at IBUSA works with many of the best life insurance companies in the country, and we can help you find the best rates on coverage, so you don’t end up spending anymore for coverage than necessary.
So, the question then becomes,
Do I need life insurance?
For some, this can be a challenging question to answer, especially if one’s need for insurance isn’t immediately apparent to them.
Most of the time, people tend to realize they need insurance after they’ve either been told that they have to have it (to satisfy a loan requirement or divorce decree) or because something in their life has just changed.
A change such as…
They just had a child,
bought a house, or
lost a loved one and had to pay for the funeral “out of pocket” because there wasn’t any money (or insurance) available to help pay for the burial that way.
In cases like these…
Answering the question “Do I need life insurance?” becomes an easy question to answer because individuals in situations like these have either experienced what can happen when someone dies without life insurance, or they have a real fear of what could happen to their loved ones if they passed away suddenly.
But what about…
Those who may not have anyone depending upon them financially?
Or those who are young and healthy and don’t expect to die anytime soon?
Or how about those who’s children are all grown and on their own and don’t have anyone financially dependent upon them?
Do people like these still need to purchase a life insurance policy?
Or is purchasing a life insurance policy in these kinds of situations a waste of money?
The truth is, only you will be able to answer this question, but before you do, we would encourage you to take a moment and keep on reading.
In this article, we’re going to attempt to answer some of the most common questions we get from folks wondering if they need to purchase a life insurance policy and provide some pros and cons for whatever choice you decide.
Questions we will attempt to answer in this article will include:
- What are some of the most common reasons why someone would choose to purchase a life insurance policy?
- What are some of the benefits of owning a life insurance policy?
- What are some of the disadvantages of owning a life insurance policy?
- If I do choose to purchase a life insurance policy, what are some of the basic things I should keep in mind when considering my options?
And one last thing. It is important that you have an idea of how much life insurance costs, so you can get an idea of what it might cost you to get insured. Because most people are surprised at how truly affordable life insurance can be.
So, let’s dive right in!
What are some of the most common reasons why someone would choose to purchase a life insurance policy?
Generally speaking, the most common reason why someone might choose to purchase a life insurance policy is to financial provide for a dependent loved one if they die prematurely.
However, there are a lot of other reasons why someone may choose to purchase a life insurance policy, such as:
- Secure a small business loan,
- Satisfy a divorce decree,
- Provide funds for a buy-sell agreement,
Or perhaps a burial or final expense insurance policy to provide enough funds to ensure that one’s own burial would be paid for if and when the insured dies.
So, as you can see, there are many reasons why someone may choose to purchase a life insurance policy, which is also why many find a wide variety of different benefits of owning a life insurance policy as well.
What are some of the benefits of owning a life insurance policy?
Since not everyone decides to purchase a life insurance policy to simply protect a loved one, it’s safe to say that not everyone chooses to purchase a life insurance policy to obtain the peace of mind that comes with knowing that your loved ones will be financially protected in the event of your death.
The benefit of owning a life insurance policy can be much more transactional.
For example, sometimes owning a life insurance policy can be the only way someone might be able to secure a loan, ensure a buy-sell agreement, or satisfy an ex-spouses divorce attorney!
And while each of these reasons may seem like an extra “burden” or “hurdle” put in your way, at the end of the day, qualifying for coverage will be what allows you to “benefit” by having these obstacles met.
“Which is a good thing!”
One benefit of owning a life insurance policy that many folks tend to “overlook” is that it is often a way to quickly and affordably obtain a considerable asset for your family.
After all, what other way (aside from hitting the lottery) would you be able to obtain a large amount of money for your loved one so quickly?
You see, for those that can qualify for a traditional term or whole life insurance policy, immediately upon being approved for coverage, they have secured a large financial asset for their family that will be available to them if you die while insured. A benefit that most would consider pretty significant given the “cost” associated with purchasing your average life insurance policy.
Let’s now compare this with some of the disadvantages of purchasing a life insurance policy.
What are some of the disadvantages of owning a life insurance policy?
There are only really 4 potential disadvantages that we can see when considering purchasing a life insurance policy. These disadvantages are as follows:
Let’s face it, regardless of how young and/or healthy you may be, at the end of the day, you are still going to need to pay for your life insurance policy (if, in fact, you can qualify for coverage).
And sometimes, this cost can be rather significant. So significant that one potential disadvantage of owning a life insurance policy is that it can be expensive.
#2. Opportunity Cost.
As with any purchase, once you use the money to purchase one thing (in this case, life insurance), that money used to purchase that item can no longer be used to purchase something else.
So, if you choose to purchase a life insurance policy, the money you use to do so won’t be available to purchase something else. Something like stocks, bonds, investment real estate, etc…
So, in theory…
One could claim that “tying up money” to purchase a life insurance policy is a potential disadvantage because this money could be used elsewhere in a more beneficial manner. Now one could debate this potential “disadvantage” however, if you’re using your life insurance policy to finance a divorce decree on an ex-spouse, you may have a valid point.
#3. Spending more over time.
In some cases, individuals will often argue that simply saving money each month would be better than purchasing a life insurance policy on their own because the amount they are being asked to pay versus the amount of coverage they are being offered doesn’t make sense.
This is particularly true…
In cases where the potential insured is older and is only looking to purchase a small burial life insurance policy.
Usually, the best way to determine if this is the case is for the customer to see how long it would take them to save the amount of money on their own and compare that with how much they would spend paying for their insurance. The only problem with this type of thinking is that as we all know, it’s much easier to “think about” saving than it is to SAVE.
#4. You Give, but you never Receive.
Probably the biggest problem with life insurance or, more specifically, Term Life Insurance is that there is a very good chance that if you are able to qualify for a term life insurance policy, it is because the insurance company believes that you will “outlive” your policy and they (the insurance company) won’t be required to pay your loved one a death benefit.
You will have paid for years and years of premiums so that your loved ones would be protected, only to see all that money “wasted” because you didn’t die while your insurance policy was in place. Now one could argue that you did receive a benefit because that insurance was in place; however, people don’t usually see it this way when it comes to life insurance.
This potential disadvantage can be eliminated by purchasing a WHOLE LIFE insurance policy vs. a term life insurance policy. However, whole life insurance policies tend to be significantly more expensive, which is why, at the end of the day, this potential disadvantage is one that you’ll need to come to terms with on your own. This brings us to the next topic which we want to discuss, which is…
If I do choose to purchase a life insurance policy, what are some of the basic things I should keep in mind when considering my options?
Once someone has decided that purchasing a life insurance policy will be the right “fit” for them, it’s quite possible that they may seem “overwhelmed” with all of the different options available. For this reason, it’s important that a customer-first understand exactly “WHY” they want to purchase their life insurance policy and then use this reason to “guide” them in their decision making.
We believe that customers should always ask the same five questions every time a life insurance agent presents them with a possible solution to their life insurance needs. These questions being:
- What “kind” of life insurance policy am I being offered?
- How long will this life insurance policy say “in force”?
- Will the price that I pay for this insurance stay the same for the life of the policy?
- Will the amount of coverage that I receive stay the same for the life of the policy?
- Does the policy being offered to me contain a Graded Death Benefit?
The first four questions are pretty self-explanatory, but the 5th one introduces a new term that we haven’t discussed at all until this point.
You see, not all life insurance policies work the same.
Some “types” of life insurance policies will require one to take a medical exam or answer a series of medical questions while others may only require that you be a US Citizen, be over a certain age and live in a state where they are offered.
These types of life insurance policies…
Are called Guaranteed Issue Life Insurance Policies and contain a clause known as a Graded Death Benefit that will limit when your life insurance policy will begin covering you for natural causes of death. As you can imagine, this is a big deal and one that you’ll definitely want to know all about, which is why we include it here so that you can be sure to ask about it in greater detail.
Don’t be, because the good news is that here at IBUSA, we understand that our role as life insurance professionals isn’t to try and “sell” you a life insurance policy. Our only role is to help you find the best life insurance policy that you can qualify for, which will meet all of your life insurance needs.
So, don’t worry if all of this seems super confusing or overwhelming, once you’ve had an opportunity to speak with us, we feel confident that if purchasing a life insurance policy is right for you, you won’t have any questions once we’re done!