Buying Life Insurance
20 Reasons People Buy Life Insurance
When I first started in the life insurance industry as a salesman some forty years ago, my understanding of the product I would be selling was very limited as to its value in so many different scenarios.
My exposure to life insurance started with an invitation from a college student selling for Northwestern Mutual to listen to him explain how I could be guaranteed that my newly married wife and I could be sure if I were to die her financial future would be assured. On top of that, if I didn’t die prematurely, I would get all my money back with interest.
As he and I sat on the campus lawn, he revealed to me the magic of a financial plan which if followed would immediately create a financial estate the size of my choosing. It would only be limited by my ability to pay and the amount the life insurance the company felt I could qualify for.
While he spoke I had a feeling come over me which unbeknownst to me then would be one of the motivating factors to keep me going in sales presentations I would give in my sales career. The feeling was that I could keep a young man’s promise to my future father-in-law when I asked his permission to marry his daughter. I promised I would take care of her and she would never go hungry or cold. (I have often wondered what he thought at such an outburst.) I went on to promise her I would dress her in furs and jewelry (I blush a bit now after 54 years of marriage, now seeing the drama of the moment. Yet it seemed so important to me at the time.)
Well, the application was completed, medical exam done, premium payment made and this policy became my visible promise keeper. Five years later, upon my entering the life insurance business, I would take that policy with me to show my clients I believed in what I was presenting to them.
Two reasons for people to buy life insurance–getting married, and wanting to provide adequate family income in case of death–were my motivation during the 40+ years of selling. Here are some other reasons I have discovered.
A Baby Is Born
Not many things can tug at Dad and Mom’s heart strings more than the first cry of a newborn. Reality–according to the U.S. Dept of Agriculture, as of 2013, it cost approximately $304,480 adjusted 1.6% annually to raise a child to age 18. Expensive but they are worth it.
People Want To Make Sure Their Home Passes Debt Free To Their Heirs.
It has never been the size or value of house which drives this desire but the fond memories and sense of stability associated with this man’s castle.
They Do Not Want To Pass on Their Financial Obligations Or Their Funeral Costs To Their Families.
As one financial planner observed, a man does not want to leave a mess for someone else to clean up.
They Want To Supplement Their Social Security Retirement.
It is reported that at age 65 the average man will live almost 19 more years, while the average woman will live another 22 years. You will probably spend 25% to 30% of your life in retirement, requiring vast sums of money to support yourself. Anywhere from 70% to 100% of your current income will be needed after retirement.
They Want To Supplement Their Social Security Death Benefits So That Their Surviving Family Members Will Continue To Maintain Their Standard Of Living.
It is wise to check on your Social Security contributions to make sure they are accurately posted. This report usually comes automatically to you but if not, the Social Security Administration can assist you in getting the report.
They Want To Guarantee A College Education Or Special Training For Their Kids.
This cost can be all over the spectrum, so check early the venue most likely your children will attend and plan accordingly. Also, there may be a child with special needs who needs extra financial attention to treat her right.
They Want To Make Sure The Mother’s Death Does Not Become A Financial Disaster As Well As An Emotional One.
In this day in age, the mother’s out of the home income may not be a luxury but a necessity. Adequate planning should be done to replace it.
They Have Received A Promotion
Good time to visit what to do with the increased salary. Exploring alternative savings methods could be invigorating.
They Have Changed Jobs.
Just like in receiving an increase in salary, this is a good time to review the financial picture to see if it is on track with retirement objectives.
They Have Gone Into Business For Themselves.
It is an interesting thing that most people don’t want to leave just footprints in the sands of time–they want to leave something more meaningful, and starting a business seems to strike that cord. Many times life savings are used to provide the seed money, and a life insurance policy big enough to cover that investment should be waiting in the wings just in case sufficient time is not allowed for the dream to come to fruition.
They Have A Key Employee Whose Death Would Adversely Affect The Profits Of The Business.
In this day of specialization, an employee is hired to fill a position where the owner does not have the expertise to make the business successful.
They Have A Key Employee Who Could Hurt The Business By Going To A Competitor.
This is a place a sharp attorney and accountant could help establish a “golden handcuff” plan to keep your valuable employee within the business family.
They Own A Business Partnership, Corporation, Or Sole Proprietorship.
Depending on which business model is chosen for the business, the perpetuation of the business will be the problem to solve. Buy-sell agreements, stock redemption plans, or cross purchase methods will come in handy for proper transfer of assets in the event of the death of key players.
They Want To Assure That The Non-participating Children As Well As The Participating Children Will Receive Equal Portions Of A Business Dominated Estate.
This is especially critical when one considers that approximately 90% of all businesses are sole proprietors whose hard work and understanding of the job is what keeps the business afloat. If this isn’t planned for properly, the business will die along with the proprietor.
They Want To Guarantee Some Business Loans.
One case in point, a young man who was a trained helicopter logging pilot and had an idea on how to build a better helicopter approached a bank for a loan which the bank was willing to do providing the young man could provide liquid collateral to pay off the loan. Balance sheets and profit loss statements showed he had the wherewithal to pay off a 3 million dollar loan, but he would need the time to do it. A life insurance policy and a business disability policy in force on the pilot’s life were given as collateral assignment, thereby satisfying the bank, and the loan was consummated. The new chopper was built, went into operation, and within two years the loan was paid in full.
They Want To Solve Special Problems Such As Giving Gifts And Bequests.
More and more affluent people are reaching out to alma maters to fund building projects or financing a chair in their field of endeavor. See if you can walk across any campus in the U.S. and not find a building named after a famous alumni and see if that person had anything to do with the financing of its construction. Good way to keep your name in perpetuity
The Estate Is Large Or Non-liquid.
Most estates are composed of mostly brick and mortar purchased through money being put to work. They don’t have a large sum of money just laying around to be used if the estate owner dies. It is an interesting observation that many estates are originally created by the purchase of a large death benefit policy, i.e. to cover a mortgage, with a recommended amount of 10 times the annual income projection, capitalization of earnings of business, etc. and then takes its place among the other assets of the brick and mortar estate.
They Want A Firm Foundation For Retirement Income That Doesn’t Depend On Their Job Or Social Security.
From (https://www.fool.com/retirement/general/2016/01/26/20-retirement-stats-that-will-blow-you-away.aspx) here are some sobering statistics:
- Average 50 year old has $42,797 saved;
- Average net worth of a 55-64 is $45,447;
- 45% of Americans have saved nothing for retirement, including 40% of Baby Boomers;
- 38% don’t actively save for retirement at all;
- 20% of Americans tap into their 401(k) assets early;
- 80% of Americans between the ages of 30 and 54 believe they will not have enough saved for retirement;
- 36% of Americans adults over 65 are completely dependent on Social Security;
- 63% are dependent (but not necessarily completely reliant) on Social Security, relatives, friends, or charity at age 65;
- Social Security is running out of money and will only be able to cover 77% of promised benefits beginning in 2034.
Here we are 50 some years since I sat on that campus lawn where the miracle of whole life insurance was revealed to me, and I marvel that everything that insurance agent spoke of has born fruit just like he said it would. Little could I have known that at least 18 more reasons could be used for purchasing the miracle shared with me.
You may already have purchased insurance with one of these reasons in mind. That’s wonderful! If not, speak to a reputable life insurance agent and see if you can get help in caring for your reason for purchasing insurance. You will be glad you did. What a good feeling of one has who has sold life insurance, that never once has it failed in its promises. It won’t fail you either.