Misconceptions About Life Insurance

I recently had the opportunity to sit down with a very special client on her 90 ½ birthday. Her name is Donna and she’ll be 91 years old this July. She has one of the longest standing insurance policies in our organization’s 97- year history. Her grandfather purchased a life insurance policy for her when she was not quite a year old. Her family maintained it when she was a girl and when she got a job as a nurse, she maintained it and has continued to do so ever since. The annual premium for Donna’s policy back in 1932 was $10.55 and remains the same today, although rates have gone up quite a bit for new policies. It may not have been a large policy but as Donna puts it, the premium was “unbelievable”.

The topic of life insurance often gets a bad rap. There are many misconceptions about it and reasons why people think don’t need it, such as “I’m single, so I don’t need it”, or “It’s too expensive”. Donna is a prime example to dispel these misconceptions. Since she’s had the life insurance policy for almost 90 years, she has been able to enjoy the benefits from it in non-guaranteed dividends, cash value growth and a locked-in low rate. Eventually, her four kids will be the beneficiaries of the value her policy has accumulated over the years.

In light of my conversation with Donna, I thought I’d dispel some common misconceptions about life insurance.

I’m not married so I don’t need life insurance

Whether you’re married or not, you may leave behind family and friends when you pass away. If you have any debt such as student loans, car loans, a mortgage, etc.; someone may be responsible for that debt, potentially your parents or other family members. A life insurance policy can help cover these expenses and take care of outstanding debts. Also, if you support elderly parents, the benefit can be used to ensure they are taken care of. Donna didn’t have any dependents when she was a year old, but her grandfather had the good sense to protect her insurability and lock in a low rate when she was a baby.

My employer’s life insurance policy is enough

Life insurance policies issued by employers are generally a great benefit, but are not always enough to protect your family should you pass away. Many companies will offer 1 – 3 times an employee’s base salary, but that may not be enough to pay for final expenses, outstanding debts, your mortgage and the loss of future income for your family. Employer policies are also not guaranteed. If a company goes through hard financial times, the life insurance benefit could be taken away. Also, if you leave the company, you typically can’t take that benefit with you to your next job.

It’s too expensive.

Life insurance will never be as affordable as it is today. Rates are generally lower when you are younger and in better health. Think about Donna and her $10.55 annual premium! Certain types of life insurance provide living benefits in addition to a death benefit. These policies may provide cash value that can be borrowed from*, and the cash value in a life insurance policy will generally grow tax-deferred. For the past 90 years Donna has earned non-guaranteed dividends and interest on her policy and despite inflation, has paid the same low premium every year.

I’m young, I don’t need it.

As we saw with Donna, you’re never too young to get life insurance. Donna’s grandfather purchased insurance for her when she was less than one, to protect their future insurability and lock her in at a very low premium. With a permanent life insurance policy you can build up the cash value over time. That means if you purchase life insurance for your child, down the road they may be able to use the accumulated cash value for things like paying their premium, taking out a loan or making a down payment on a car or first home.

In sum, life insurance helps to gives peace of mind. It helps families sleep better at night. It helps families to stay in their same standard of living. It helps kids to stay in their same school with their same friends. At the end of my sit down with Donna, I asked her if she had any advice for younger generations and she said simply, “I think it’s very important for a family’s breadwinner to have a good life insurance policy and in a company that you can trust. Mine has lasted all these years. Insurance is important to a family.”

Cesar Minera is a Financial Representative with COUNTRY Financial in Reno, NV. He can be reached at cesar.minera@countryfinancial.com or 775-412-6596 with questions.

Life insurance policies issued by COUNTRY Life Insurance Company® and COUNTRY Investors Life Assurance Company®, Bloomington, Illinois.

*Policy loans and withdrawals decrease the cash value and face amount of the policy. The decision to purchase life insurance should be primarily based on a need for the death benefit. Policies are not an investment and are not appropriate as a replacement for retirement savings accumulation.