Five reasons people avoid buying life insurance
Reason 1: I don’t want to think about the possibility of dying.
No one is comfortable discussing the possibility of their own premature death or of someone they love dying. This denial can cause anyone to avoid asking for quotes and applying for their own life insurance.
“The most common time clients call to ask for help in getting life insurance is when they witness the financial hardship on loved ones after a family member or neighbor dies,” says Sally Long, a licensed life insurance agent with Carter Glass Insurance Agency LLC in Raleigh.
Reason 2: I have life insurance through my employee benefits plan at work.
Group life insurance is frequently paid by the employer or offered at a lower group rate with little to no underwriting if the employee uses payroll deduction. Group term life insurance often is offered for an employee’s spouse and dependent children via payroll deductions at the group rate.
“But there may be potential pitfalls to having all of your life insurance needs met through your employer’s group life insurance plan,” Long notes. “What happens to this coverage should you leave that employer for any reason? Does the coverage end or is it portable should you be laid off, become sick or injured and unable to work, resign to work elsewhere, or enter retirement?”
Some plans are not portable or the coverage would end at age 70 or 80, while other plans are portable and have competitive premiums.
“The key is to know how the coverage would work once employment ends,” she says.
Many group term life policies have premiums that increase each year that the insured gets older.
“As you age, the policy premium might become too costly to fit into the household monthly cash flow and budget,” Long notes.
Many group plans also limit or cap the total amount of death benefit, such as one times a salary or a flat amount like $15,000.
“The employee and family members who have this group life plan do not have enough life insurance death benefit to cover debt, income replacement, and true end-of-life and burial expenses,” she says.
Reason 3: I don’t work, so I don’t need life insurance.
The main purpose of life insurance is to provide economic security to dependents of breadwinners upon death.
“Not having a life insurance policy on the homemaker too often is an undervalued part of protecting the family from financial hardship,” Long notes.
“Life insurance also can provide the money to hire others to do the services the homemaker performed, like child care, laundry, housecleaning, grocery shopping, preparing meals and yard maintenance,” she adds. “Having a life insurance death benefit check to pay for these services will protect the breadwinner’s ability to continue working full time to support the family.”
Reason 4: I make enough money and have savings.
In North Carolina, cremation typically costs more than $3,000, while a casket, vault and burial plot can cost more than $9,000. Often, the loved one who died was hospitalized for sickness or injury prior to death, so the family is left with medical bills, including deductible co-pays.
For some, the probate and estate expenses — as well as dividends and capital gains taxes from liquidating investments — can add up. Following a death, families that liquidate real estate or equities investments might find the value less than what was previously expected if they must sell when the markets are down.
“Also, continuing to make debt payments for mortgages, home equity loans, credit card balances, student loans and automobile loans can become a burden when one household income suddenly stops due to unexpected death,” Long says.
“Handing loved ones a life insurance death benefit check can ease their financial burdens when they need it most.”
Reason 5: Buying life insurance is confusing and costs too much.
There are many different types of life insurance, including term and more complex policies with cash value like universal life and variable universal life. Typically, term life insurance is simple to purchase: You pick the death benefit amount you want and how many years you want to have that death benefit in force, and the life insurance company provides you with a level premium based upon your age and health.
Term life insurance often has a less expensive premium than cash-value policies. Ask a life insurance agent to show you quotes for various options, as well as to help you determine how much death benefit you’ll need both now and as you age.
Long cautions those without a life insurance policy to act sooner rather than later.
“Don’t let denial or procrastination keep you from answering this important question: If I were to die prematurely, who would hurt financially, and what am I going to do about it?”
Sally F. Long is an associate agent with Carter Glass Insurance Agency LLC and a licensed life and health agent. To reach her, call (919) 781-1973, ext. 7009, or visit www.carterglassinsurance.com.