Think life insurance is too expensive for you? Think again. An eye-opening study just might prove you wrong. Affordable life insurance may need to be a part of your financial planning.
Before we talk numbers, let's talk about life insurance beliefs. According to the nonprofit Life Happens, the insurance industry research group LIMRA, most people believe it is important to have life insurance. Yet, those same people don't buy life insurance either because they believe it is too expensive or they have other financial priorities. Let's take a closer look. Do those life insurance beliefs hold any water?
Belief #1: I can't afford life insurance because it is too expensive.
In Life Happens' 2018 Insurance Barometer Study most consumers overestimated the cost of a term life insurance policy at over three times its actual cost.
Millennials were the worst at overestimating. When asked what they thought a $250,000 term life insurance policy would cost for a healthy 30-year-old, 44% of millennials estimated the cost at over five times the actual cost.
Looking at a broader age group, most Americans estimate the annual premium to be about $100-$500. Actually, the premium for the sample policy (20 year, $250,000 term life for a healthy, non-smoking 30-year-old) was around $160 annually. Yes, you read that right: $160 annually, or roughly $13.00 a month. If you buy only one latte a week from your local coffeehouse you'd spend close to $20.00 each month.
As you can see, affordable life insurance is possible. You just have to make it a priority, which brings us to the second major belief.
Belief #2: I can't afford life insurance because I have other financial priorities.
The other reason most people don't buy life insurance is other financial priorities. These priorities may include basic living expenses, or extras like Internet and cable, paying off consumer debt, and saving for retirement.
These are the priorities of fiscally-responsible adults. Who can argue with them? However, rather than dispute the priority ranking, consider how these priorities would be met if you or another wage earner in the family died prematurely. When you think about loved ones struggling to maintain their standard of living, suddenly $13.00 per month seems pretty doable.
Plus, you don't have to buy a million dollars of coverage. Even a relatively small benefit amount would prove invaluable in helping your loved ones transition during a time of crisis. It's better to have some life insurance than none at all.
A few more thoughts …
So now we know that life insurance can be much more affordable than first imagined and that life insurance is really another important piece of the financial puzzle along with basic living expenses and saving for retirement.
Life insurance can help replace lost income, pay off a mortgage, leave an inheritance, and of course, cover final expenses and burial costs. That's a pretty versatile list.