Insurance Poor??
We Are Insurance POOR!! Really?
by: Tommy Mike
What does that mean? As I go out into the field to help seniors with their final expense insurance needs, I often hear this mantra. What does it really mean in the mind of the senior? What I have found is the person saying this means they are on a fixed income and money is very limited.
In their mind, all insurance is an expense and all insurance is the same.
To be able to help these folks, I have to help them understand that I can protect them and stay within their budget. First of all, most advisers recommend that 10% to 20% of annual income should be allocated to insurance and retirement. This is a general suggestion for those of us on a fixed income.
Now, the biggest misconception that I hear is all insurance is in the same category. Really, it is not. Look at the types of insurance-house, health, fire, automobile, mortgage, renters, cancer, liability and the list goes on. You get the picture. These types of insurance are for your protection against a risk or catastrophe. Pay the premiums and hope upon hope that no claim will ever be filed against the policies.
Here is the difference. When talking to seniors about final expense whole life permanent insurance, ask this question: what are the odds that you will die someday? That’s right-100% and that means that 100% of our policy will go to the desired beneficiary. All that is required is paying the monthly premium. Of course, you do have to have the right kind of insurance and the right company for your needs. I only recommend A rated companies that have 50 to 150 year track record of guaranteeing their benefits.
Whole life insurance is an asset to the owner not like the types of insurance mentioned earlier. The definition of an asset in simple terms is something that makes money. The cash value that builds in your whole life policy grows at 4 to 6% interest plus you have a death benefit that protects your loved ones in the event of your passing. The biggest difference in this cash value in your policy and an IRA or a 401K or many other government pension plans is that you control and have access to your cash value in your whole life policy. You are not penalized for using your cash value as an emergency fund if you need it. With most government pension plans, if you need to access it early you will be penalized. I always recommend to purchase as much whole life insurance as your budget will allow. Why would you keep money in a savings account that earns only 1/2 of 1% interest. You can earn 4-6% interest on your cash value from your whole life policy. Also, with the death benefit I strongly believe that permanent cash value whole life insurance is protection and an asset. I have several whole life policies to protect my family , but these policies can also provide immediate funds if I need them in an emergency.
So if we are on a fixed income with no type of budget, what do we do? Well, that’s a deep question.
Most people know that we don’t live forever although I have actually talked to some people who think they will! We do need to prioritize for final expense. The average burial service is around $12,000 today. I know you know people who have spent less and others who have spent more, but I did say average. What really gets people’s attention is the average cost of a funeral can double in 10 years. That should not be surprising to any of us. I remember when a coke was five cents for a bottle. Then they went to six cents, ten cents and now the cost is around $1.50 for a bottle and they don’t even taste as good as they used to taste!
The cost of cremation can be between $3000 – $5000. A few short years ago, the cost of a cremation including picking up the body was $750. That is quite a bit of inflation in a few years. Some of you reading this are thinking that “I have plenty of money so I don’t need to worry”. Let me share a brief story.
Several years ago, I was working in south Georgia. I went to visit a lady who had asked for help with her insurance. Her brick home was in the middle of a huge farm. I ask her how much land she owned and she told me to look as far as I could to the north, south, east, and west. She owned it all. She had huge tractors all around her barns and I ask her a question. “Why do you need insurance to cover your funeral expenses?” She told me, “I do not want to use my own money to pay for my funeral. I would rather the insurance company pay for my funeral and all I have to do is just pay the affordable premium every month”.
It makes sense to have permanent whole life insurance whether you have millions of dollars or you live on Social Security income.
