The financial protection you should be talking about
by Jennifer TornedenMs. Torneden is SVP Distribution, Marketing & Strategic Growth with Legal & General. Visit www.lgamerica.com
Life moves pretty fast, if you don’t stop and look around once in a while… well, you know the rest. As life constantly changes and shifts with new jobs, new babies, new homes, marriages, divorces, pandemics, recessions and more, term life insurance is a financial strategy that can help you weather both the storms and sunshine. It’s something worth bringing up to your financial advisor at your next meeting.
We know that term life insurance provides coverage at a fixed rate for a limited period, or a term that can range from 10 to 40 years. It offers families protection to financially maintain their way of life even after a loved one dies, acting as a sort of security blanket during the darkest days. One of its key benefits is its simplicity – it is simple to understand, simple to fill out applications, simple to claim and rates are locked in despite what the market or a policy holder’s health journey does. While term life insurance is not an actual investment vehicle, it is an investment in family and the legacy left behind. It is also something that 106 million Americans either do not have or do not have at the appropriate level.
There are risks at every turn, and most of those risks cannot be eliminated. But they can be managed. And life insurance is one tool that can help manage those risks no matter where you are in life – from Gen Z to baby boomer, employee to entrepreneur, or single to married with kids. Let’s look at why and how.
The Best Time to Buy
According to LIMRA’s Life Insurance Barometer Survey, nearly 40% of insured consumers wish they would have purchased their policies at a younger age. Yet it’s easy to see why many don’t. At 18 or 20 years old, it’s hard to understand what you have to protect or even to imagine your own mortality. With age – and increasing levels of personal and financial responsibilities – that understanding becomes much clearer.
Given this dynamic, it’s a little ironic that your 20s may be the best time to actually secure life insurance – but it is. It’s the moment when people are typically at their healthiest, so they receive a lower premium rate that lasts 20 or 30 years before additional health problems crop up as they tend to do with age. In fact, three very similar women in their early 20s, 30s and 40s, who all work the same job, exercise, drink in moderation and don’t smoke can have wildly different premiums. The 20-year-old could lock in a $22/month while the 30- and 40-year-olds could be paying $33 and $76 respectively. Knowing these variations that come with age, it is important to have these conversations with financial advisors early to see what works best with your existing financial strategy.
The Benefits at Every Life Stage
The reasons for the generational divide on purchasing term life insurance policies are fairly straightforward, those in their 40s and up are often at peak earning potential, have a family and the financial responsibilities that come with it. It was also something they most likely saw their parents go through in their home with insurance agents and spent time discussing over the dinner table.
On the flipside, the reason heard most often from the 20- and 30-year-old brackets is that they’re not married, may not own a home or don’t have a family to take care of if they do pass away earlier than expected. But life insurance doesn’t mean it can only be given to a spouse or children. Many people use it to pay for their student loans or mortgages if they pass away. This saves their parents or other beneficiaries from managing another debt. It can also be used as a charitable donation to keep a legacy alive.
The younger generation prides itself on giving back and being civically minded; life insurance is another way they can do that should the unthinkable happen. For those who eventually do find “the one”, they are starting a new life together on a more solid foundation by having a life insurance policy with an existing low rate instead of applying at 35-years-old after finding a partner and having a higher premium to carry with them.
That Entrepreneurial Spirit
Behind the scenes, the pandemic spurred a record number of new businesses from 2020 to 2022. According to the U.S. Census Bureau, there was an impressive 5.4 million new business applications filed in 2021, surpassing the record set just the year prior with 4.4 million. These new businesses also require significant financial discussions that take on a new shape for entrepreneurs and small business owners. Life insurance is now not solely protecting and supporting their families; it’s also protecting the company they tended to and grew with countless hours of grit, dedication and love.
With all these new businesses, the weight of financial burden increases — if the owner or executive in charge of sales and business development dies, what is there to protect not only their family but to keep the business going? A life insurance benefit can help cover expenses, from salaries to day-to-day operating costs, as the organization tries to find its footing without its captain.
The COVID Factor
In addition to inspiring entrepreneurs, in 2020 COVID-19 triggered a significant spike in life insurance awareness and value visibility. According to the October 2020 LIMRA report, The COVID-19 Effect: High Tech With Human Touch to Optimize Life Insurance Customer Experience pandemic-related events influenced 32% of life insurance shoppers to investigate the product, outpacing traditional life events like marriage or birth (23%) or tried and true friends and family influence (29%). The prominence of the pandemic and the uncertainty it brought, could be the cultural shift America needs to be able to broach topics like life insurance with less awkwardness.
This shifting dynamic is similar to the change in thinking around pet insurance, which wasn’t really talked about in the United States 15 years ago and yet today has become one of the fastest growing voluntary benefits in the country. In that case, people’s relationships with their pets changed and the number of pets in the nation changed, driving greater interest in protecting their furry friends. Across the pond, and particularly in the U.K., consumers already have a strong relationship with life insurance and the United States is playing catch up. The onset of the pandemic made the need for life insurance real for individuals, families and businesses. It created a strong reason to bring life insurance into current financial planning conversations rather than waiting for specific life events or merely waiting to feel “old enough” to consider it.
Steadfast For All Circumstances
From single 20-year-olds managing student debt and 35-year-olds starting a family to a 40-year-old venturing out on their own with a new business, term life insurance is a financial planning tool that should be considered. When a policy has been issued, the insurer cannot change the rate of premium, even during a recession or if you develop a new medical condition. Unlike whole life or universal life, the death benefit on term life policies cannot be changed, so a beneficiary’s payout will not suffer even if the stock market does. Term life insurance can provide that critical peace of mind and the confidence that no matter what happens to other investments or retirement accounts during the market’s ups and downs, consumers are able to provide for their families after their passing. That’s an incomparable gift to give during some of life’s toughest moments.
While it can be an uncomfortable topic – because it deals with one’s own death, life insurance is a financial strategy is worth discussing with a financial advisor at any point in time. Like that well-loved, trusty security blanket, it can be a stable, feasible option through all of life’s milestones as well as rocky economies and unpredictable markets. The conversation can act as one of the best decisions for those left behind at death to keep living their brightest lives.