The Top 12 Myths of Final Expense Life Insurance
Lives are flooded with unforeseen events, right? Well in this article I am going to debunk some of the myths around Final Expense Life Insurance. We are going to go over some of the biggest mistakes that can be made in planning one of life's only guarantees. For some, death is an uneasy topic and often times be over looked. I want to transfer this knowledge to you so that you know exactly how to properly plan and make it as simple as possible. I am excluding the "buy term and invest the rest" myth because that point gets brought into every one of the "top life insurance myths"
1). MY WORK INSURANCE WILL COVER ME
Life Insurance from work is a great employer benefit, however typically the payout is fairly low, in comparison to private insurance through your personal advisor. That may not be enough to provide for a young family. Plus, what if you lose or leave your job? A workplace policy doesn’t stay with you, therefore a personal policy is the safest way to ensure your family is adequately able to financially continue without you.
2). BUY TERM BECAUSE IT'S CHEAPER
This is a common misconception. Breaking down term insurance, we know that claims are successfully paid out only three percent of the time. Not to say that Life Insurance doesn't have a place because it does. However, non of us on Earth have a magic crystal ball that will tell us when we die. For final expenses it makes much more sense to have a policy that is going to guarantee that your life is insured.
3). ONLY THE BREAD WINNER NEEDS IT
This is one of Life Insurance's biggest misconceptions. Let's break it down though, if we know that everyone will die at some point and we know that death will trigger unexpected expenses. Wouldn't it make sense for all members of the household to be enrolled in a program specifically designed to cover life's final event.
4). I'LL JUST BUY A FUNERAL PLAN FROM THE MORTUARY
Just like any business, mortuaries are out to make money. We've all heard of funeral homes taking of advantage of people when they are most emotional. While not all mortuaries are bad, what they do when they set up a funeral plan is they just buy Whole Life Insurance on you often times over and above the cost of your funeral. This gives them a way for maximum profit. It is much more cost effective to work with an advisor and do your planning that way.
5). I'M TOO OLD, IT'LL BE TOO EXPENSIVE
What's interesting about this one is that the debunk of this has been around since 2001. In 2001, the industry switched to a new mortality table. Too many people were out living their life insurance policies and it was not good for the consumer nor was it good for the insurance companies. The new mortality table suggest we use the age of 121 to base the individuals life off of. There's a ton of mathematical algorithms that are used to determine the actual numbers for cost of insurance, but the best way to look at it, is that in the eyes of the insurance company you are 21 years younger than your age.
6). I NEED $100,000.
Life insurance isn't a competition. I could think of different scenarios where millionaires need $23,846 and could think of many different scenarios where average people need multi six figure amounts. Life Insurance should only be used for a specific purpose. Don't have it just to have it. Be proud to know that you own it and that you are strategically planning for what's to come. Also, life insurance should be a specific dollar amount, rather than a round number. Be deliberate with your planning. This is your legacy.
7). I WOULDN'T QUALIFY BECAUSE OF MY HEALTH.
This one makes me laugh. Advertisement of Guaranteed, no questions asked, Whole Life Insurance is everywhere. Whether it's a piece of mail or a forgotten game show host, it is constantly in our faces that there is a life insurance policy for every single person. Now, in my experiences, most people will qualify for a more cost-efficient program that they can enroll in.
8). I MAY NEVER USE IT?
I cannot make this up, I've had people look me in the face and ask me, "What if I never use it", I kind of just looked at him, no response. As he thought about it for a second, he realized what hopefully all of you already realize. We will all die. Except maybe Willie Nelson...
9). CREMATIONS ARE UNDER $1,000.
You may have seen billboards or mailers about funeral homes doing full cremations for under $1,000. While this is not a lie, it's extremely misleading. The price discussed on the solicitation piece is the price to simply turn on the oven. That doesn't take into consideration the countless (replace that with real number based off article) other decisions that need to be made such as transportation, storing, parties. (Replace with better ones)
10). IT'S JUST ME, WHY DO I NEED IT?
Unfortunately, you cannot bury your brother Frank in the backyard or stick him on the grill (multiple people have actually said that to me). When someone dies, there is a cost associated with it, whether it’s to pay for the services or outstanding debt. If you decide Life Insurance shouldn't be a part of your "portfolio" and you don't have enough assets to cover your final expenses, what will happen is your friends and family will all pull together every resource available to ensure your expenses are met which whether they admit it or not, it's a burden. I have witnessed more car washes being held to raise money for final expenses than I can really handle.
11). I GOT SOMETHING IN THE MAIL
Please be careful of the fine print in any life insurance advertisement. I have seen many cases where Accidental Life Insurance was mistaken for Whole Life insurance. I've also heard many instances in which the client could have easily qualified to enroll in a much better program. So, reach out to an advisor. We are free to you and can help properly navigate through the appropriate channels to ensure the very best.
12). I COULD PUT THAT AMOUNT INTO SAVINGS
I don't understand this one. If you would rather put your $120 a month into a savings account, what would happen if you died tomorrow? How much would you have? It's as if the reason for this ideology is that the consumer doesn't trust insurance companies. Which is ironic to then trust the banks. Regardless my main concern for this point is what I said at the beginning, none of us have a crystal ball that lets us know when our last day is.
It is my sincerest hope that you gained some knowledge and understanding of some of Final Expense's most relevant misconceptions. Thank you for reading and remember to plan smart, plan with your heart, and most importantly, plan efficiently.