Why Don't More People Own Life Insurance?

There's a plan for every Budget

Michael Zaino
President & CEO, TZG Financial in Charlotte, NC

Life Insurance Insurance

Why Don't More People Own Life Insurance?
April 21, 2017

One of the biggest things I learned in the military long ago was that proper prior planning prevents pitifully poor performance. I am astonished at the number of otherwise seemingly intelligent adults who do not have some amount of insurance, even if only enough to prevent placing the financial burden of paying for their funeral on their loved ones upon their death.

Life insurance comes in all shapes and sizes and there IS a plan available to satisfy everyone's needs. Some plans are temporary; some plans are permanent. The younger one purchases coverage, the cheaper it will be. Today's life insurance policies are no longer the "death" insurance policies of yesteryear. Many companies offer products with LIVING benefits - benefits that guard against the insured becoming chronically, critically or terminally ill at some point during their lifespan, and allow for the access to the majority of the death benefit while the insured is still alive.

Some will argue that they don't have a "need" for life insurance, that they have the assets to cover the cost of a funeral. But I believe in the smartest use of money. If the average funeral in the US costs around $10,000 (and that's if you die TODAY and doesn't take into consideration rising costs and inflation), instead of having to drain an account of $10,000, or worse, having to sell off assets to come up with the cash, a Single Premium Whole Life policy typically delivers at least a 25% return on one's money (depending on age). That's an IMMEDIATE return! For example, with one of my carriers, a 65-year-old female non-tobacco user could "trade" a premium of $10,000 for an immediate death benefit of $18,552.88. A male of the same age would get $16,393.44. Throughout the life of their policy, they would still have access to 85% of the cash value of their initial deposit in case of emergency. The younger one does this, the greater the return - a 50 year-old would get $28,490.03 for the same $10,000.

My point is this: besides the obvious uses for life insurance, there are many other usage factors to think about.

Life insurance can be used for replacing a stream of income, providing heirs with liquidity when they need it most, replacing the value of an asset, paying estate taxes, maximizing your pension or Social Security benefits, funding college for the kids and grandkids, providing liquidity to an estate, buying out a business partner, protecting a business for the replacement value of a key employee, satisfying debt, funding charitable gifts, providing for a special needs child or adult, equalizing an inheritance, longevity planning, and balancing investment risk.

The key is speaking to a professional who is capable of helping you navigate the sometimes-choppy waters and educating yourself on how to utilize life insurance as a tool instead of looking at it as just another expense.

Get free life insurance quotes and apply for your top choice in minutes using our Life Insurance Quote Comparison Tool.

Photo ŠiStockphoto.com/zimmytws

  Conversation   |   6 Comments

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Zanna | 04.21.17 @ 16:09
When we were younger I didn't have a clue about what life insurance was for or why we needed it. My husband got a policy through work, but that monthly fee taken out of the paycheck really bugged me. After seeing what my parents have gone through dealing with an incapacitated family member who had no insurance and no savings, I'm so thankful we have our policies for the future!
Carla | 04.21.17 @ 16:30
The thought of burdening our son or our siblings with the cost of our final expenses really worrys me. We have insurance on each of us that should more than cover what is needed. I see a lot of people left in devastation not knowing where to turn when a loved one is sick or has passed and there is no money for the expenses they need. It is heart breaking.
Daniel | 04.21.17 @ 16:39
It does seem these days Life insurance is often overlooked or dismissed simply to avoid the expense. In the long run though it is an important item to have and can really save when it is needed.
Chrisitna | 04.21.17 @ 17:20
This is something I really need to look into further. We both have policies through work, but I doubt that is enough. Thanks for the reminder!
Jane | 04.22.17 @ 22:31
I would like to have life insurance to cover expenses after I pass. I can't afford it.
Saving in WI | 04.24.17 @ 15:44
Do not buy "Whole" life insurance. Life insurance should be used to protect your family in case you die. Life insurance is not a tool to use as investing. Buy term insurance and do your investing anywhere else.
$commenter.renderDisplayableName() | 11.29.20 @ 15:53