September is #Liam

Millennials are wrong again, but as usual, they think they’re right! Being a Millennial, gives me a license to pick on my generation. We think we’re pretty smart and savvy, but according to a fascinating article by Jason Fischer, we could benefit by correcting some of our outrageous assumptions about life insurance.

September is life insurance awareness month (#Liam) so let’s go over some of the interesting points that Jason Fisher writes about in his article, starting with the Millennial fails, of course!

  • “83% of Americans felt they would consider life insurance more intently if it was easier to understand. Millennials, ironically, felt they understood it most, with Seniors reporting the most difficult time understanding their purchase.”[i]
  • “Millennials were the worst (by a long shot) at guessing costs [of life insurance], expecting the price of a policy to be 3 to 4 times what it actually would. Only 7% of people underestimated the cost.”[ii]

Shockingly, 41% of Americans do not carry any life insurance, even though 84% of Americans would agree most people need it.[iii]

So why don’t more people have life insurance? The two most common reasons given were:[iv]

  1. It’s too expensive.
  2. Other financial priorities take higher precedence.
Wealth Summit 2018

But life insurance is not as expensive as most people think because remember only 7% underestimated the cost of it and Millennials {suppressed laughter} weren’t even in the ball park, estimating the cost of life insurance to be 3-4x what it actually is.[v]

So how much does life insurance cost? The answer is it depends on:

  • Age
  • Health
  • Sex and
  • Benefit amount

Fortunately for us, I have access to life insurance illustration software and can run quotes to our hearts’ content. Let’s do a couple now.

We’ll pick on the guys because everything else being equal, guys always pay more for life insurance because we are more likely to die earlier doing something stupid than women.

Keep in mind as we run these two examples that the cost of insurance goes up with:

  • Age
  • Disease and history of disease
  • Tobacco and other addictive substance use
  • Risky activities and the
  • Presence of a Y chromosome

Knowing this information will allow you to estimate other scenarios based on the two we will run now.

Let’s start with that 35-year old male who’s walking from his car to his office with a Tall Starbuck’s Latte in his hand. This guy’s not in good health, but he’s not in poor health either; he’s average. Let’s give this guy $1 Million of guaranteed coverage for 20 years. After making the correct inputs, the software shows us that this man will pay less for $1 Million dollars of coverage for 20 years than he will for the Tall Latte[vi] in his hand that he buys every morning on his way to work. His insurance will only cost $2.72 per day or $82 per month. That’s less than $1000 per year. In contrast, what can $1 million dollars do for his family if he is suddenly taken from them before he turns 56?

$1 million dollars, where I live in the Las Vegas Valley could pay off a 5-bedroom ($500,000) home and pay for 4 children to complete 4 years each at the University Of Las Vegas, all-expenses paid ($265,216) that includes:[vii]

  • Tuition and Fees
  • Rent and Utilities
  • Food Expenses
  • Books and Supplies and
  • Miscellaneous Personal Expenses

AND there would be money left over ($234,784).  Not bad for less than the price of a Tall latte in the mornings.

Now let’s run the numbers on a 45-year old man. This man is 10 years older, so we know for a fact that premiums on the same amount of coverage, for the same term will be more expensive. Just like the first man, he’s in average health. What do you think he will pay for $1 Million of coverage for 20 years?

It turns out that with the increase of 10 years of age, the premium will more than double and for the same coverage, this man will pay $184/mo. That’s still not too bad when you consider the fact that he’s still getting $1 Million of coverage which can put four kids through 4 years of college each, pay off a half Million-dollar home, and his beneficiary will still have almost a quarter Million dollars left over. Furthermore, he will have the coverage until he’s 66 and the daily price of the insurance ($6.12) is less than enjoying a daily Grande Latte and a Morning Bun from Starbucks.[viii]

While we’re running numbers, let’s do something else. Let’s assume these guys are in excellent health (they eat a lot of salad). What are the premiums on their policies now? The 35-year old will now only pay $39/mo., or $1.31/day. Comparing that to the cost of a lunch salad, makes the salad look like a bad choice. So, don’t do it.

The 45-year old in excellent health will only pay $94/mo., or $3.13/day, which still makes the cost of salad look outrageous.

Realize that even though these healthier guys are paying less for their insurance, they will still get the full $1 Million of coverage for 20 years.

Life insurance awareness should extend beyond pricing and death benefit awareness though, and for a quick crash course on life insurance and to increase your life insurance awareness I’d recommend you read the 8-page guide called, “The Best Kind of Life Insurance: And How to Get a Good Policy.” You can get the Guide for free by going here.

And finally, if you have been wondering what Term rates would be on a 27-year old male smoker? Or what a 32-year old healthy female would pay? Or anything else…don’t ask a Millennial because if you do, you’ll have to divide their answer by three or four.

Drop the criteria (Age, Sex, Health, Benefit Amount) into the comments below, and for the rest of #Liam I’ll use the software to run the numbers for you and post the answer back.

Here’s where you can get that Guide on life insurance: https://s3-us-west-2.amazonaws.com/lifebenefits/What+is+the+Best+Kind+of+Life+Insurance.pdf 

[i] https://www.bestliferates.org/blog/2017-life-insurance-statistics-and-facts/

[ii] ibid

[iii] ibid

[iv] ibid

[v] ibid

[vi] https://www.fastfoodmenuprices.com/starbucks-prices/

[vii] https://www.unlv.edu/apply/college-costs

[viii] https://www.fastfoodmenuprices.com/starbucks-prices/