‘Guaranteed’ seems like a positive word.
It is in most instances; however, there are several things that we are guaranteed that are not as appealing. If you work hard to make a living, you are guaranteed to pay your share to our government through taxes.
Most of us do not want to think about the inevitable. Death is another thing that is guaranteed to each of us. Whether it is tomorrow or 80 years from now, we will all pass from this earth. We buy home insurance with no guarantee our home will burn down, and car insurance with no guarantee we will total our vehicle or injure someone else. Why are so many reluctant to purchase insurance for the one guarantee we do have?
I will share a personal story with you regarding my wake-up call.
Brad Jones and his family.
On September 17th, 2019 I personally received news none of us want to hear. I had been losing sight in my left eye over the past three months, and had gone to an eye doctor several times to find answers. On the third visit I was informed that my retina had detached. I thought this was good news, since that can be repaired and eyesight may be regained. When I arrived at the retina specialist, he informed me after additional testing that I had a large tumor in my eye. A rare cancer of the eye, with a 50% chance of metastatic disease with no cure, and an average life expectancy of 2-8 months.
At that moment everything I believed was so important — work, work, work — became less important. Everything that really mattered became very clear: family, friends, love, and faith. I began to see that life is not guaranteed. Life is precious, and I realized we are not immortal. We are not guaranteed tomorrow.
I have always been one who is a step ahead of problems, planning for different scenarios and situations. I do not believe this cancer will be my punch card to clock out, but I knew I had to consider and plan for the chance the unexpected may occur. As I mustered up the courage to plan for the unexpected, a peace came over me.
Several years ago, I purchased my first life insurance policy. As my family’s needs changed, I purchased more, updating my policy to match what my family needed. I understand that money does not bring happiness, but I also understand that I am my family’s ATM as the financial leader of our household. Each month the ATM (me) provides the income our family needs to live comfortably. With all the worries that go through my mind daily, I know that my wife and children will be able to live comfortably, payoff any medical bills, maintain our home, and my children will be able to attend the college of their choice due to the fact I sacrificed a small amount of money and purchased life insurance.
Like many, I am a frugal individual when it comes to finance. There were many days over the years when I was healthy and thought I was immortal that I considered reinvesting my life insurance premiums into another financial investment. Looking back, I can see that would have been the worst thing I could have done. Whether I pass today or when I am 90 years old, my family will be taken care of due to a decision I made years ago. That peace of mind is worth much more than a lifetime of minimal premium payments.
From September 17th forward I will no longer qualify for any additional life insurance due to the cancer. But I already have it now, and it cannot be taken from my family.
I believe many who have not experienced the unexpected feel the way I did, that these things happen to other people, but not to me. In a busy life we never stop to think about the unexpected, I believe we subconsciously avoid it. We may feel nothing will happen to us and everyone will be fine if something does happen.
The reality is, it is not a question of if something will happen to us, the real question is when something will happen to us. We need to take a step back, and picture what it would look like if the unexpected happens. With this we can better understand our needs, our family’s needs, and be prepared.
In this article, I will highlight several points you may consider when determining your life insurance needs. The last thing you want is for a life policy to be something different from what you thought it was or being sold something that backfires years after your agent has retired into the sunset.
There are two types of life insurance.
Temporary Life Insurance
Also referred to term life insurance, this type of life insurance is used for those who have a temporary need. An example would be a 27-year-old father or wife of three who is the bread winner for the family. This individual understands that over the next 20 years his family would be devastated if something were to happen to him or her. The house payment, vehicle payments, college savings, credit card payments, and other household bills do not stop after the unexpected happens. Temporary life insurance is there to handle this situation replacing much needed income for the family, making the family financially whole again.
Temporary Life Insurance Pros and Cons
This type of insurance is cheap. It meets a short-term need.
Once the policy term has expired, it is done. Temporary life insurance is much like renting a home. Once it is expired it is gone. It is cheap due to the fact the risk is lower for payout. Statistically, chances are low that a 27-year-old will pass before age 47.
Things to consider when purchasing a temporary life insurance policy.
IS THE POLICY CONVERTIBLE THROUGHOUT THE TERM?!?
This is extremely important to know. Why? For example, Jane Doe buys a 20-year term life policy at age 42. When Jane turns 59, she finds that she has breast cancer. She spends the next three years fighting he cancer. She has spent much of her savings fighting and has medical debt as well. She calls her agent to see if she can buy another policy and finds out that she no longer qualifies and in six months will no longer be able to attain or renew her life insurance. If Jane had a solid policy from a solid carrier, she would be able to convert her face amount (death benefit) into a permanent insurance product without being underwritten again. She would receive the same health rating she did when she was 42 and simply be rated based on her age. Jane would have options.
When purchasing life insurance ask your agent to see whether the policy can be converted throughout the life of the policy. Ask them to point this information out in the contract. Life insurance is much different than today’s healthcare. Pre-existing conditions will eliminate your ability to acquire the amount of life insurance you need.
How much do I need?
More than likely, if you have life insurance or have ever shopped for life insurance, your agent threw out a number and you went with it. You may have thrown out a number as well to the agent. So how do you know how much life insurance you actually need? At Trophy Insurance Solutions we take the same approach with life insurance as we do your personal property and liability insurance. First, we have to find out who you are, what you have to protect, identify exposures, and then begin the process of building the right policy for you. This information is also used for permanent insurance as well.
The first things we would need to consider would be your exposures.
- Income Replacement
As mentioned above, if you owned an ATM that issued your living expenses every month you would definitely insure it. What we need to do is replace your ATM. If the ATM generates $6,000 per month, we need to make sure we are able to meet the family’s financial obligations. Every case is different. Typically, we like to see five to fifteen years income replacement for the family. Some may be okay with $3,000, and that is fine too.
The last thing we want to leave to our loved ones is debt. Common sources of debt may include a mortgage, vehicles, or credit cards.
If you have children, setting aside money for college is important.
- Medical Expenses
Not many of us are lucky enough to peacefully pass away in our sleep. More times than not, we find ourselves with a condition that requires weeks, months, or even many times years to treat. Having money set aside for these unforeseen medical expenses, lodging, experimental treatments, and other treatments that may not be covered by health insurance.
Leaving more behind than we took feels good. Providing college for grandchildren or leaving enough behind for your children to buy their first home is a generous gesture. You can also leave money for your church or favorite charitable organization if you choose.
Temporary Insurance (Term Insurance) fits the needs of many. The policy has upside and downside. It meets a short term need in many cases. Talk with your trusted agent to determine whether a term policy will fit your need.
Do not be afraid to shop and get a second opinion regarding your life insurance needs. Keep your guard up as you shop for a life policy. Many captive companies require their agents to sell a quota of life insurance each month or each year. When an agent is forced to sell a product or else, you may find yourself being sold something that benefits the company or the agent more than you.
Permanent Life Insurance
(Whole Life, Universal Life, Graded Death Benefit, Transitional Life)
Most of us prefer to own our home rather than rent. Permanent life insurance is yours until the day you pass. Whether 16 years old or 99, the face amount goes directly to the beneficiary. You own the policy until the day you pass.
In this article I will not go into the details regarding each type of permanent product. Rather, I will discuss the pros and cons of a permanent life policy and hopefully provide some understanding.
Pros and Cons
Provides peace of mind knowing no matter what life throws at you, you are covered throughout your entire life.
Great investment! If you do the math on dollars in vs. dollars out a permanent product will provide your family more money than invested.
Cash Value. Not only does this product provide your family with the face amount of the policy, some permanent products will also pay cash value on top of the death benefit. The cash value can be accessed many times as well for emergencies or for retirement purposes. Be sure to sit down with your agent to obtain the proper education regarding cash value.
There are not many cons regarding a permanent life insurance policy. Some have more upside and flexibility, some can be used as a retirement tool, and some can be even be written if you have serious medical condition with smaller face amount. Some may shy away from a permanent option due to the fact premiums are typically higher than a term. This is due to the fact the policy will pay the face amount in the end no matter the age or condition of the insured.
Guard up! Be sure to deal with your trusted agent and do not be afraid to get a second opinion. Read over the contract. I cannot tell you how many upset people have come into our office 20 years after buying a permanent product universal life in particular. They were sold on the fact it would be there forever. The problem is, the agent is now retired into the sunset and the policy was not funded correctly. Universal Life is a great life product. However, if not done correctly it could come crashing down. If it is funded correctly it can be used as a retirement tool. Having an agent who has your best interest is key. Do not allow fear to keep you from getting the right product for you. There are many great agents who are capable of taking care of your needs. Do not be afraid to ask tough questions, get second opinions, visit with your CPA, and attorney.
Life insurance is cheap, but pays big dividends! It protects families from the unexpected and provides peace of mind knowing your family will be okay financially. I have seen both sides, the families who had life insurance and those who did not. I have had clients pass away weeks after having life insurance conversations who never bought, and it haunts me knowing there was something I could have done to better protect their families.
I can honestly say I have never had a customer who was upset that they purchased life insurance. On the flip-side, it is a bad day when a wife or husband calls our office asking if their spouse had a life policy with our agency. If we fail to educate our clients regarding their insurance needs, we have failed, much like a dentist who fails to tell you about a cavity. What makes our jobs rewarding is helping others. Does life insurance bring back our loved ones? No; but, it does take care of funeral expenses, medical debt, mortgage, retirement for our spouse, college for our children, and quality of life for our families when we are gone.
Whether you acquire life insurance with Trophy Insurance Solutions or another trusted agent, your family is in a better place. Protecting families and their Trophies is what we do. We are more than happy to sit down and discuss your life insurance needs. Trophy Insurance Solutions has relationships with dozens of the nation’s top carriers to ensure you receive the right policy fitting your need. We also provide other services that include long-term care, Medicare supplements, cancer plans, and much more. We are here for our clients and even those who seek a second opinion. To learn more about everything Trophy Insurance Solutions has to offer, please reach out to us at (940) 325-2003.