Life insurance is often misunderstood
by many retirees. In my many years as a financial planner, I have learned that
most people (myself included) have some type of bias they bring to any
situation, including their finances. It’s very challenging to step back,
remove the emotion of these misconceptions and objectively evaluate a situation,
especially when it comes to life insurance.
Recently, I had a client who was
dissatisfied with their life insurance agent. Because of their bad
experience with that individual, they had developed a negative bias
towards life insurance in general. After much discussion, the client
explained that one of their major concerns was that if either spouse passed
away, the surviving spouse would only receive one of their two
current Social Security checks. Their previous life insurance agent had
attempted to take advantage of this concern for the surviving
spouse by “selling a product” and it had left a bad taste in their mouths.
I understood their concern and
described a Social Security income replacement plan to address the issue. I
explained that they would have to place funds into this plan and if either
spouse died, the surviving spouse would have a pension that would
provide income replacement for the Social Security check. Also, if they both
chose to terminate it in the future, there would be some form of cash back to
the family. If they both died, there would be a Social Security continuation
plan to their beneficiaries.
I further explained that this solution
had three conditions:
1) Good health to qualify
for the program.
2) Budgeting and
financial planning to pay for the program.
3) Foresight to sign-up
for the program before the death of either spouse.
After we looked more closely at this
program, the clients became curious to know the name and where they could
"buy this program." I explained that it was actually a specialized
type of life insurance that they could purchase through a life insurance
agent or agency. Understandably, they were shocked.
After a good laugh, the clients
admitted that they did in fact have a bias against anything with the word
insurance in it. I joked that the butcher does not sell a lot of “cow butt” but
he does sell a lot of “rump roast." The clients agreed to find and
purchase the right life insurance policy for them.
In
1977, the name of the Patagonian Toothfish1 was officially changed to Chilean
Sea Bass by a fish wholesaler named Lee Lantz. Mr. Lantz was looking for a name that would
make the fish more attractive to the American market. What does this mean? It
means a lot of folks enjoy Chilean Sea Bass, but wouldn’t order the Patagonian
Toothfish, even though it's one in the same.
The same can be said about life
insurance. Misconceptions about
life insurance are very common, but when it comes to supporting
your surviving spouse or family members, it is a very useful tool. If
you've lost your partner, here are a few tips for you
as the surviving spouse2. Dealing with loss is
difficult enough, don't let misconceptions about life insurance keep
you from creating a plan to help you take care of your loved ones.
2 "Tips for the Surviving Spouse" New York Life
Insurance Company; http://www.newyorklife.com/learn-and-plan/tips-for-the-surviving-spouse
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Credit: rhurtubia
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