When you buy a car you can’t exactly just fire up the engine and say, “Ahh, I’ll wait and see how things go for the next five or ten years. Maybe when I turn 40 I’ll get some auto insurance.”
Same goes when you buy a home. There’s no choice but to insure-up.
And because of this two things came to my mind. First of all, selling home and auto insurance must be like shooting fish in a barrel! Maybe I’m in the wrong industry…
And secondly, the government obviously must not think life insurance is important enough to be made mandatory. But then why does everybody I work with think life insurance is so important?
I decided to give Scott Christie, Assistant Vice President at Foresters Financial a chance to defend our industry’s reason for existence.
But when I asked Scott why life insurance isn’t mandatory, his response was as brief as it was unhelpful.
“I don’t know the answer to that.”
This interview was off to a rocky start.
Luckily for me, Scott seemed to feel obligated to elaborate after we shared a long and awkward silence.
“I suppose it’s because car insurance and home insurance were made mandatory for the greater good and for public safety. But for whatever reason, the legislators who decided those types of insurance were going to be mandatory didn’t view life insurance in the same way.”
At this point I expected Scott to start telling me about his new master plan to lobby the government for some sort of mandatory life insurance law. But to my surprise, he’s actually opposed to that entire idea.
“I don’t like anything mandatory! As a consumer I just want to be left alone to make my own decisions” – Scott’s a real rebel in the life insurance world in case you haven’t noticed.
“Plus I don’t even think we could make it mandatory. How would that work exactly? Hey people, be good parents and buy life insurance – it’s mandatory now! I can’t see that going over very well.”
Scott raises a great point. In addition to it not being practical, it ignores the actual problem. In addition to life insurance not being a public safety issue, a lot of people just don’t think it’s worth their time or money to get a policy.
In fact, a recent study showed that only 17% of uninsured consumers said they were very likely to purchase insurance in the next year.1
Life insurance isn’t mandatory – but here’s why it should be part of your financial plan
After a bit more thought I realized that assigning importance to things based on whether they are mandatory may not be the greatest system.
Because if you think about it, most of the smart financial decisions we make aren’t mandatory. Nobody forces us to save for retirement, our children’s education or Spice Girls reunion tour tickets.
But we incorporate most of these elements into our financial plans anyway because we get that they’re in our best interest. Life insurance is similar.
It’s just one more piece of your portfolio. And it can help your family continue to meet their financial obligations in the event of your death. Plus for some newlyweds and young parents, the cost could be around a dollar a day or even less.2
Considering that $30 a month3 could be the difference between your family being able to stay in their home or not, the choice seems pretty simple. There are also a lot of benefits of having life insurance that you can personally take advantage of while you’re still – you know – breathing.
And for those responsible young people out there who think they are covered through their work plan, just keep it mind these benefits may not be enough to support your family.
“Many companies are no longer offering one year of your salary anymore as compensation to your family in their group benefit packages,” says Scott.
“Most are just offering a single flat amount. So if your family were to receive one of these basic payouts of $50,000 would that really be enough to cover their mortgage and any other debt you’ll be leaving behind? No.”
Another important consideration with workplace life insurance plans is what happens to your coverage if you leave your company? Will it come with you or will you lose your policy? The right life insurance agent or advisor can help you sort out all these details and develop a plan that works for your family.
Start by finding a life insurance agent or advisor that gets you
Some life insurance agents and advisors will sit down with you at your kitchen table, pull out a pad of paper and just focus on how much your policy will cost and what the details of your coverage will be.
Unfortunately, the problem with this approach is that it can become really boring and confusing in a hurry – a point Scott illustrates with an example from his family’s recent hunt for a new car.
“When my wife and I were shopping around town most of the sales people were obsessed with telling us every little detail about transmissions, ABS brakes and horsepower. Stuff we didn’t really understand and couldn’t have cared less about. We were just looking for a vehicle to haul kids around,” Scott says with a laugh.
“So we ended up going with the dealership rep who took the time to ask us about our actual needs. How many kids did we have? What was our lifestyle like? What were our hobbies? Our concerns?”
Scott recommends taking the same approach when choosing a life insurance agent or advisor. Make sure they’re asking you about your needs first and that they aren’t bogging down the conversation with technical jargon.
Pick an agent or advisor you click with, someone who understands your family’s unique challenges and is presenting clear solutions.