There's no question that not everyone needs life insurance. According to the Consumer Federation of America (CFA), there's little reason to buy it if you don't have any dependents, "since there is no economic catastrophe associated with death."
Even then, though, there are exceptions, with the CFA declaring that "those who expect family responsibilities soon may wish to get coverage early to guard against a health change that could raise costs. Substantial term life insurance is inexpensive for young non-smokers, so paying for what you don't need yet, but will soon, is not a serious burden."
Still, at least the case can be made that if you're single, and especially if you're single as well as relatively young and healthy, you may not feel a pressing need to purchase life insurance as soon as possible.
The same can't be said for a lot of the excuses that people who pass on buying this type of insurance use when asked to explain their hesitation or indifference. In fact, most of the reasons cited by folks who fail to see the appeal or benefit of life insurance are pretty easily refutable, with the following examples being noteworthy cases in point.
1. Life insurance costs too much (or I can't afford it)
Here's the funny thing about this particular line of reasoning: usually life insurance isn't all that expensive.
That depends on a number of factors, of course, including how old you are when you decide to take out a policy, how healthy (or unhealthy) you are at that time, whether or not you're a smoker, which type of life insurance, and how much coverage you want to buy.
If you're fairly young and healthy and you're not a smoker, though, you should be able to get a 20-year, $250,000 level-term policy for less than $200 annually.
This is far from common knowledge among today's consumers. Todd Silverhart, Ph.D., corporate vice president at LIMRA Insurance Research, shares that the work he and his colleagues have done in this area suggests that "consumers generally do not have a good understanding of how much a life policy might actually cost."
In fact, he adds, "they tend to over-estimate the actual cost a lot," with a good example being that, when asked (as part of the 2015 Insurance Barometer Study that LIMRA conducted with non-profit Life Happens) to guess the yearly cost of the above-mentioned policy, the average person replied $400. The median response from people under the age of 25, on the other hand, was $600, while a whopping one in four assumed the bill to come to $1,000 or more.
2. I don't need it because I have plenty of assets to leave my loved ones
That may be true, but what form are those assets in at the moment? Are they mainly liquid, meaning your beneficiaries could quickly convert them into cash should the need arise? Or are they mostly in non-liquid form, which would mean real estate, a share in a business, or even jewelry?
If it's the latter, a life insurance policy could provide your loved ones with access to some "ready cash." This would allow them to pay off debts that require immediate attention. It would also let them retain those non-liquid assets rather than selling them for a fraction of what they'd get.
3. I'm healthy
You are now, but what about five or 10 years down the road? Actually, none of us knows for sure how healthy—or not—we're going to be tomorrow or the next day, let alone a year or a decade in the future.
It doesn't take much Internet surfing to find stories of people who ignored life insurance because they were healthy or young (or both), only to be blindsided by an unexpected medical crisis that made them ineligible for life insurance.
This doesn't mean everyone should run out and buy as much life insurance as they can afford. If you've got a spouse, or children, or a parent who relies on your financial support, though, you should seriously consider at least some form and amount of life insurance. Even if you regularly get clean bills of health from your physician.
4. I've got too many other things to worry about right now
Maybe you're recently married, or you're busy prepping for your trip down the aisle. Or maybe you're about to have a baby, or you just had one.
Those situations and many more have prompted a lot of people to put "buy life insurance" at the bottom of their to-do lists—assuming it ever made it onto these lists to begin with.
But you never know when something unfortunate or unexpected could happen to you. So if there are people in your life who depend on your income, you should make life insurance a priority again as soon as you can.
5. I don't understand it well enough to buy it
All sorts of studies have found that one of the main reasons people don't purchase life insurance is that they're confused by all of the varieties and options that are made available to them during the buying process.
According to LIMRA's and Life Happens' 2015 Insurance Barometer Study, for example, 38 percent of participants cited "I’m not sure how much or what type to buy" as their reason for not purchasing.
"Given that buying life insurance is believed to be important and not something that is done often, the uncertainty that surrounds it paralyses many people," Silverhart says.
One fairly obvious solution to this issue is to reach out to an experienced agent so you can be led through the process by a helping hand rather than tackle it on your own.
6. I find the process intimidating
According to a 2014 LIMRA study, more than 70 percent of people who purchased life insurance policies through their employer said they were happy with the process and even described it as "comfortable."
A more recent study from the same organization, on the other hand, suggested that those who go to buy life insurance on their own are far less pleased with the experience. In fact, many say they find it intimidating.
Again, this is another situation where working with a professional who knows the ins and outs of the industry would help ease some of the tension associated with such a complex product.
7. I have other financial obligations that are more important than life insurance
For some people, spending their hard-earned cash on vacations, or shopping, or movies, or eating out is more important than using it to pay for a life insurance policy. For others, cable, Internet, and phone bills come before life insurance.
In fact, according to the most recent Insurance Barometer Study conducted by LIMRA and Life Happens, 60 percent of Millennials consider their cellphone, Internet, and cable payments higher priorities than purchasing life insurance, with 49 percent of those 65 and older saying the same thing.
According to Jim Kerley, LIMRA's chief membership officer, “Consumers today are confronted with more financial demands than ever. Younger shoppers in particular realize they need life insurance, but it’s not a priority for them."
One way to make it more of a priority for younger and older consumers alike, he adds, is to reinforce just how cheap life insurance can be—especially if you spend a bit less on eating out, movies, even your daily coffee run and use the savings to fund an insurance policy instead.
8. I don't trust insurance companies or agents
This keeps more people than you may imagine from buying life insurance. The aforementioned study conducted by LIMRA and Life Happens found that nearly 40 percent of respondents didn't purchase it because of insurance agents.
If this describes you, there are a number of places you can go to read up on any companies you're looking at. A.M. Best, the Better Business Bureau, the National Association of Insurance Commissioners, and your state insurance commissioner's office are four great examples.
9. I'll get to it eventually
Another way of putting the above is to say that a lot of people procrastinate when it comes purchasing a life insurance policy.
"Even though they recognize the value of life insurance and are aware of their need for it, many consumers [30 percent, according to the most recent Insurance Barometer Study] just haven’t gotten around to taking care of that need," Silverhart says.
10. It makes me think about death
Similarly, 30 percent of the men and women who participated in the 2015 Insurance Barometer Study suggested they've avoided buying life insurance because doing so causes them to think about their mortality.
Unfortunately, there's no easy way to combat this particular quandary—other than, perhaps, to point out that the thought of leaving your spouse, or children, or other loved ones in dire financial straits isn't likely to be much more, if at all, appealing thank thinking about passing away.
Frequently Asked Questions
Q: In what kinds of situations or circumstances would I want to avoid or ignore life insurance?
A: Most experts will suggest staying away from life insurance if you're single, or if you don't have any dependents. Many will say the same in regard to retirees—or at least a certain segment of the retired population. There are times when even folks in these situations may want to buy life insurance, though—with two cases in point being young, single people who assist siblings or parents and retirees who help support grandchildren.
Q: Do "empty nesters" need life insurance?
A: Sometimes, yes. For example, are there people in your life who depend on you for financial assistance? If so, you'll probably want to invest in this kind of insurance even if your children have "flown the coop." Another instance when life insurance may make sense for a so-called empty nester is if you're at all concerned about the Social Security “blackout period” that impacts some folks—women, especially—following the death of a spouse. (Because Social Security pays nothing between when your youngest son or daughter finishes high school and you apply for survivors’ benefits—the latter of which isn't possible before you turn 60.)
Q: I'm a retiree. Do I still need life insurance?
A: Whether or not you "need" life insurance as a retiree depends on your current circumstances. If you're free of debt, you no longer rely on an occupation for income, you have children who are self-sufficient, or if you're having a hard time paying your premiums, you very well may not need, or no longer need it. That said, if you're still paying off your house, or if you're supporting one or more dependents, you could make a far worse purchase than life insurance.
- A Buyer's Guide to Insurance
- Why should I buy life insurance?
- Life Insurance - Insurance Information Institute
- The No. 1 Reason People Don’t Buy Life Insurance and Why They Are Wrong
- Six in Ten Life Insurance Industry Leaders Foresee External Disruptions within Next Five Years
- LIMRA Study Finds Majority of Gen X and Y Consumers Believe They Need More Life Insurance, But Few Will Buy
- Three Ill-Advised Reasons Not to Buy Life Insurance
- Do I Need Life Insurance?
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