Life Insurance - What is it? And why do I need it?
According to many sources, life insurance ownership hit an all-time low in 2013. If most Americans say that they need life insurance, why do less people than ever before own it? I believe the answer is lack of awareness and education.
First, people either deny or don’t understand why they need life insurance. I would say you need life insurance for the same reasons you need health and car insurance; in case something happens to you, the burden on your family and the impact upon others of your loss would be lessened. If you have debt; credit cards (in 2012 the average household with at least 1 credit card had nearly $16,000 in credit card debt, according to creditcards.com), a mortgage, student loans, medical bills, dependents; children, spouse, parents, or don’t want to make other people spend over $7,000 (2014 national average) for your funeral, you need life insurance. Another reason why people don’t get or have life insurance is because they don’t know what it is or what it does.
In 2012, LIMRA published results of a life insurance IQ test it conducted. 70% of test takers failed! (Here is the link to the test. http://ow.ly/LId73 I got 100%, see if you can match me!) It makes sense why less and less people have life insurance. Damnant quod non intelligent: they condemn what they do not understand. If this is the case, we should define life insurance. There are more than a few definitions out there; I’m paraphrasing Wikipedia on this one. “Life insurance is a contract between an insured and an insurer, where the insurer promises to pay a designated beneficiary a sum of money in exchange for a premium, upon the death of the insured person.” So, you enter into a contract with a life insurance company that states as long as you pay your premium (monthly, semi-annually or annually), and you die while insured, the life insurance company will pay your beneficiary the death benefit (generally tax-free). I added while insured because only permanent life insurance policies are guaranteed to pay the benefit (no one lives forever). Term policies are temporary. Since there is less likelihood of you dying while owning a term policy, and thus the insurance company having to pay a death benefit, the premiums on term policies are lower than for permanent policies. Okay, so what does life insurance do?
Whether you have temporary or permanent insurance, life insurance provides you peace of mind. If you die while insured, all the reasons listed in why you would need life insurance could be taken care of. Regardless of your own personal reasons for getting the insurance, it is your beneficiary, i.e. the ones you love, that will benefit. Grieving takes time, and a life insurance death benefit buys time. Deaths of those with term insurance are usually sudden and/or unexpected. It takes time to pick up the pieces. Deaths of those with permanent policies are generally older and the benefit, in part, can be used to say goodbye with dignity. After the passing of the insured, life insurance lessens or eliminates financial crisis for the beneficiary. Life insurance allows those that live on the ability to do so, financially. That is what life insurance does.
Regardless of your level or education, income, or background, life insurance exists to protect you and your loved ones. If you don’t know how life insurance can help you and/or your family, don’t be afraid to ask. We are here to help. You not having coverage doesn’t affect you or me; it affects those you love most.
About the author: Anthony Veloso has been in the life insurance business for over 2 years. He enjoys coaching football, playing outside with his dog, and taking day trips with his wife and newly born daughter. Anthony is a strong supporter of Orphanages and Battered Woman’s shelters. He would love to put his experience to work for your family to ensure that you have the right life insurance policy. You can contact Anthony at 1-800-654-1953 or AVeloso@Pivot.com.