Understanding human value beyond the salary
by Al PucciMr. Pucci is a financial advisor at Empire Wealth Strategies, the career agency of the Penn Mutual Life Insurance Company, and is located in Tarrytown, N.Y. Connect with him by e-mail: Pucci.Alfred@pennmutual.com.
For a young couple, hearing the news that a baby is on the way brings with it plenty of exciting emotions and sometimes uneasy feelings. Will the baby be healthy? Will the house be ready? Do we have the right bottles, diapers and clothes?
Unfortunately, too few are asking the question, do we have enough life insurance?
Before buying a crib, blankets or bibs, parents should make sure they’ve also purchased life insurance to cover an unexpected financial burden. It can sometimes be an easy-to-overlook aspect of baby planning for new parents, but unfortunately, a death can happen at any time – before or after the birth of a child. While starting a family is a happy time in life, and some may not want to think about the possibility of not being there for their children, having this protection in place can also give new parents important peace of mind.
Interestingly, while many new parents, specifically mothers, realize that their lives and their finances will change with the arrival of a new child, many do not realize or think about the significant financial impact their loss could have on the family.
According to a recent LIMRA survey, seven out of 10 married women agree that life insurance is a necessity and all people should have it. While this is encouraging and similar to what I hear from many of my clients, one-third of the wives surveyed own no life insurance at all – despite the fact that 70 percent are in dual-income households, and nearly 30 percent of these wives earn more than their husbands.1
How women underestimate their true value
What’s also concerning is the fact that many women are underestimating their own worth, and in effect, may not own enough life insurance. According to a recently released white paper from Penn Mutual, without factoring in salary and other financial assets, women greatly underestimate how much value they’re bringing to the home in terms of non-monetary contributions. Women surveyed estimated they contribute about $47,000 per year to the household, when it’s actually much closer to $97,500.2
Perhaps much of this lack of adequate protection is due to the fact that, according to National Underwriter’s 2013 Life Insurance Survey, fewer than 1 in 5 advisors report having a client base that’s at least 50 percent female.3 As an industry, we need to devote more time to educating women about their real worth and how to protect their family financially.
Proper education is the foundation of any sound financial plan. In order for new and expectant mothers to make wise financial decisions, now and in the future, it’s up to advisors to give them the knowledge and resources they need to make that happen.
After seeing all of these troubling statistics, and having Penn Mutual’s expansive myWorth tools and tips available right at my fingertips, I began to focus a large portion of my business on working with new mothers, a demographic that’s drastically in need of more complete and individualized financial and life planning.
I recently presented at a workshop to members of Rivertown Mamas, a network of expectant and new mothers in the community of Dobbs Ferry, N.Y., and shared with them the importance of life protection, college savings and retirement planning.
As a group, I asked them if they had thought about life insurance since becoming pregnant or having a child. Some hands went up, and some didn’t. And though I do think these mothers and soon-to-be mothers understand the need for life insurance, many of them admitted they didn’t have this coverage because, “we’re young, and nothing is going to happen to us.” They didn’t seem to realize that purchasing life insurance is one of the first things new parents of any age should do when told are expecting a child.
The fact is, life is unpredictable, and life insurance is necessary for both younger and older generations. I’ve employed a few strategies to help get this concept across to expecting couples and new parents:
- Be direct. I’ve recently had meetings with two couples preparing to have a baby, and when I found out they were pregnant I first congratulated them and then said, ‘Great, I’m glad to hear you’re happy, but what have you done about life insurance?” It may seem overly blunt, but it’s important to be as direct as possible because most people don’t think about life insurance until after the baby is born, and unfortunately, that can sometimes be too late.
- Let them ask the questions. For many young mothers and pregnant women, seeing a financial advisor is a first. While I like to ask a question to get the conversation started, it’s often more beneficial to let the women and their spouses ask as many questions as possible and then answer them as honestly as I can. This makes the conversation more about them, and also lets them know I have their family’s best interests at heart.
- Share real-life examples. Several years ago, a family member of mine passed away very quickly after being diagnosed with cancer. He left behind a wife and young child. There was little time for the family to react to the diagnosis, let alone plan for the future. While they did receive a small death benefit, it was nowhere near enough to replace the financial loss of the husband. No one expects to die at a young age, but this just brought home to me the importance of being prepared for anything.
- If you know of any similar stories, consider sharing them if it feels appropriate. Without real-life examples it can sometimes be tough for a new couple to understand the profound impact of their loss on the loved ones left behind. Sadly, tragedies do happen, and no matter what your age, you need to plan for the “what ifs.”
- Use financial calculators. Another tool that helps explain to new mothers the importance of life insurance and appropriate financial planning is Penn Mutual’s Worth for Women online calculator. This helps both stay-at-home and working mothers imagine what their “salary” would be if they were compensated for all that they do around the house. The calculator is interactive and fun, and helps them better understand how their many contributions truly add up.
My work with young couples, including single mothers, has given me an opportunity to fulfill a need among this group that’s largely unmet. I hope to continue to educate them about the importance of life insurance, and the protection and peace of mind it provides at any age. An important part of my role as an advisor is illustrating the true value of the contributions women make every day, and ensuring they have adequate coverage so their families can manage financially in the event of their loss.