?It'll Never Happen To Me?? ? A Life Well Lived

Let?s face it ? when it comes to life insurance, you?re either realistic or impractical. I always appreciate a client who?s thought out their situation, understands the financial situation their family would be in, and takes steps to ensure that in the event of a death, their family would be taken care of. Chances are, the fact that you?re even reading this right now shows that you?re a realistic thinker.

Unfortunately, the world is not entirely filled with realistic minds. One of my pet peeves that I occasionally encounter in the life insurance industry is listening to a potential client rationalize to me why he doesn?t need life insurance. I?ve heard everything from, ?It?s a waste of money!? ?or, ?Oh yeah, I?m fine financially ? I?m not worried? to, ?I feel great! ?I don?t foresee my death anytime within the next 50 years!? and of course, ?If something happened, my family could just sell the house!? They?ll go on and on about how they could invest the amount of money they?d pay to a life insurance company, make a wonderful 10% annual return, and in 15 years, be better off than if they ever wasted their money on that expensive life insurance policy.

When I come across people like this, I often smile, politely thank them for their time, and move on to help someone else who puts the well being of their family first. However, I don?t forget about these people very easily, and I often will think about our conversations over a period of several days.

Here are the top 4 absurd claims made by impractical life insurance shoppers and rebuttals for each:

1) ?There?s no way I?d pay that much money for this life insurance policy! I?d be better off investing in the stock market.?

You can? Well, let?s break it down. You?re 55 years old, and I?ve just quoted you a $250,000 life insurance policy for the next 30 years for $240.00 per month. Yes, if you found a magical investment that will guarantee you a 10% annual return with zero risk, and you invested $240.00 a month for the next 30 years, you?re right ? you would have over $521,000 in the bank. However, even if that investment existed, it would take you over 22 years to equal the $250,000 death benefit that your life insurance policy offers from day 1.

Secondly, you are NOT going to make 10% annually for the next 30 years. You?d be lucky if you made 4% consistently. Even then ? you?d have to make it through the next 30 years with no downturns in the economy and never a down year with your investment. Let?s say you somehow managed to do that ? at the end of 30 years, you would have just under $168,000 in the bank. ?Yet your life insurance policy will pay $250,000 to your family ? from day 1.

Most importantly, you?re not thinking clearly. If you pass away tomorrow, will your wife, son, daughter ? all of whom rely on your income ? continue living the way you?ve accustomed them to? Or will things dramatically change? You can save all the money you can spare, but at the end of the day, if something happens to you tomorrow and your family is left with your debt and lost income, chances are your savings might last them a few months tops.

2) ?I feel great! I?m not planning on dying anytime soon!?

I?m glad you feel great, and I sincerely hope you continue to feel that way for a very long time. Unfortunately, that?s not how life works. You see it in the headlines all the time ? an incredibly healthy athlete from one sport or another suddenly collapses and dies. A drunk driver kills an unsuspecting father and daughter on their way home from soccer practice. A pedestrian crossing the street was hit and killed by a driver too busy texting and not paying attention to the road. The list goes on and on. Of course you?re not planning on dying, but let?s face it ? not many people sit down and plan their death, yet we all end up dying at some point.

3) ?My family would be fine ? they can just sell the house.?

And then what? What if they don?t want to sell the house? Right now, houses aren?t exactly flying off the market, and how much profit would they receive ? if any? Will they buy a smaller house, or just move in with their parents or friends? Would you be ok with them living at the local homeless shelter?

The fact of the matter is that most Americans don?t have significant equity in their homes today. If you do, then that?s truly fantastic ? but don?t make your family immediately sell their house in order to continue paying the bills and putting food on the table. Remember that if you do die unexpectedly, there are still funeral costs and medical bills that have to be accounted for. If you have significant equity in the house, then don?t overload on life insurance. However, make sure you still have adequate coverage for final expenses and at least one year of living expenses.

4) ?It?s just too expensive.?

?$50.00 a month is not too expensive. What?s too expensive is that new 60 inch LED TV on your wall.? This has never been spoken, but often thought about in my mind on several occasions.

I recently sat down with a young husband and wife who were approved for preferred rates, and at the time of delivery had changed their mind. Their combined annual income was close to $70,000 and they lived in a modest 3 bedroom house. Their total monthly premium was just under $50.00, and it was a full return of premium 30 year term policy ? $18,000 back at the end of their term. Broken down, their daily premium per person for $150,000 of coverage was only 83 cents. Somehow this was just too expensive. I looked around the house admiring their 60 inch flat screen LED TV, the nice stereo system, and their new Ashley furniture set. Yet a month prior, when I originally met with this couple, the wife looked me in the eye and said ?Dave, I don?t know what I?d do if my husband passed away. I?m sure I?d lose the house.?

After having a very real, straightforward conversation with them, the couple accepted the coverage, and I know they?d be ok in the event of an unexpected death. ?It?s just too expensive? is always an excuse. It often means you?d rather spend your money on tangible toys and frivolities that you can enjoy in the here and now rather than thinking about your family?s future.

At the end of the day, people will think how they want, and act accordingly. But the truth remains ? death is unavoidable. I can only hope that your family?s best interest is planned for and they do not suffer financially during their time of loss. The late Steve Jobs may have said it best when he spoke these words:

?No one wants to die. Even people who want to go to heaven don?t want to die to get there. And yet death is the destination we all share. No one has ever escaped it. And that is as it should be, because death is very likely the single best invention of life. It is life?s change agent. It clears out the old to make way for the new. Right now the new is you, but someday not too long from now, you will gradually become the old and be cleared away. Sorry to be so dramatic, but it is quite true.?
- Steve Jobs [Stanford commencement speech, June 2005]

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