How many times have you been heard, “I have plenty of insurance”? This is perhaps one of the most common objections when offering Payment Protection and yet, a very common myth. The reality is that having plenty of life insurance has nothing to do for “them”, but what it does for their surviving family. Fact is, life changes constantly and if insurance needs aren’t updated during lives changing events, they may fall short which could be devastating for their surviving family.
Fact: *86% say they haven’t bought life insurance because it’s too expensive, yet overestimate its true cost by more than 2 times.
When purchasing life insurance, the question really isn’t how much you need, but how much capital the family will need at the time of death. Two variables to consider are:
1) How much will be needed at death to meet immediate obligations? Items such as final expenses, uncovered medical bills, funeral and estate settlement costs, outstanding debt, mortgage balance and college.
2) How much future income is needed to sustain the household? This is the amount the surviving family will need after the death of the primary wage-earner.
What is often times forgotten, when purchasing life insurance, is variable 2; not having enough income for the surviving family. The medical bills, funeral, and mortgage may be eliminated; however, estate costs, outstanding debt and loss of income may fall by the wayside.
As finance professionals, we need to consider what our client may be giving up for their family’s needs. We need to ask the tough questions; “In the event of your death, who will be responsible for repaying this debt”? If their response is, “Oh, not a problem, I have plenty of insurance”, then ask, “Fantastic, how will that be handled”? Our obligation is to ensure that every client has the “facts” and truly understand how their family may be affected.
*LIMRA and LIFE Foundation 2013 Insurance Barometer Study