A case for life insurance
by Jessica Maiato
Coming from a small loving home with hard-working parents, we never heard of the words “Life Insurance”. What is Life Insurance? How would it benefit my family and me? Do I really need another bill right now?
Life Insurance is an uncomfortable topic because it usually involves thinking about an unpleasant worst-case scenario, living through the death of an extremely close loved one; therefore, many people just avoid the subject altogether. When I search the meaning of “Life Insurance”, it says “Insurance that pays out a sum of money either on the death of the insured person or after a set period.” What does that really mean to a family that is working pay check to pay check in Bermuda? “Another company that wants my “hard” earned money.” “Another scam”, were the exact words that I received from someone I spoke with last week.
You have no idea when you will need insurance, which is why it is essential to plan ahead. The day you die your income stops, however, your family will still have to pay rent or a mortgage, groceries, cell phone, cable, and electricity bills, etc. Purchasing a policy at a young age is the way to go. The younger you are, the less expensive your premiums will be.
There are two main factors in determining the cost of life insurance. The first one is the applicant’s age. As you age, it becomes more likely and more imminent that an insurance company will need to pay beneficiaries, resulting in higher premiums for those that purchase a policy in later years. To mitigate that risk, insurance companies will charge higher premiums for older first-time applicants. If you are a 20-something, you are more likely to be single and childless, but that doesn’t mean you will stay that way. You may decide to settle down, and at that point, the appeal of life insurance may become clearer. The downside, however, is that by waiting to buy, you will be facing higher premiums. As a general rule life insurance for young adults is less expensive.
What types of Life Insurance do you need? In terms of options, life insurance for young adults generally falls into two categories: Term and Permanent Life Insurance.
Term Insurance is inexpensive and is used for temporary needs. It has a lower initial cost, but the premium will increase when it’s time for renewal. This kind of policy pays a death benefit to your beneficiaries if you pass away before the term expires. The greatest benefit of a Term policy is that you have the option to convert it to a Permanent Policy after a specific of length time.
A Permanent Policy is very common. It offers a death benefit along with guaranteed cash values. If you pick this type of life insurance policy, you are agreeing to pay a certain amount in premiums on a regular basis for a specific death benefit. The savings element will grow based on dividends the company pays to you.
The question is, how can you afford Life insurance? Let me give you a practical solution, take me, for example: for the price of daily breakfast, I can cover my entire family with Life Insurance. Like many of us I like to have coffee at one of our local coffee shops each morning, so think of it this way: For a Vanilla Latte and a toasted bagel, I could easily spend $11.00 a day.
Now multiply the price of that coffee and bagel by five for the days of the work week and then by four weeks in a month, and just for that Vanilla Latte and toasted bagel I have spent $220.00 per month on something that can be toasted at home and brewed at work for free (thanks to our generous employers!). Therefore, at the age of 30, with that $55.00 per week, a Term Life Insurance policy for 20 years for coverage of $1.3 million can be offered.
Which simply means, God forbid, should something happen to me within the next 20 years, my family will receive $1.3 million dollars, which could cover expenses including my funeral expenses, remaining balance on our mortgage, my son’s school and college fees, replace my salary for a few years and still have something to start a new life without me. This is especially important for parents of young children or adults who would find it difficult to sustain their standard of living if they no longer had access to the income provided by their partner.
Today, we see technology ruling families, and their pockets as every kid wants the latest iPhone and not really thinking about what that thousand dollars for the iPhone X can cover if an unexpected death was to happen. A Life Insurance Policy can be designed to cover the cost of your funeral or cremation expenses when you die. Bermudians are no different than citizens of countries all over the world and fail to realise that funerals can cost upwards of several thousand dollars. This failure to plan ahead and prepare for such an eventuality can sometimes lead to financial hardship on families or loved ones who must cover the costs.
We don’t know when we’ll pass away. It could be today, tomorrow or 50 years from now, but it is one of the few certainties we face, it will happen eventually. Life is uncertain, and life insurance can be an essential element of a sound financial plan. Buy what you can afford, and buy it as early as possible, but only after receiving proper and professional advice.
I would like to leave you with a short poem that I believe will hit home for many Bermudians:
“Because he loved me,
He did the dishes,
Rubbed my feet,
Surprised me with tulips,
Took me to musicals even though he didn’t like them,
Carried my bags while I did the shopping,
Held my hand.
He died of cancer four years ago.
Because he loved me,
I can stay in our home.
I can be here for our children,
I can afford to pay for their college education.
I can worry about the other things in life besides money. He still loves me. And he still shows it.
Life Insurance. You do it for love.”
Jessica Maiato is a Life Insurance Sales Agent at Freisenbruch-Meyer. She is a talented sales professional who builds loyalty and long term relationships with her customers.
This article was originally published in the February 2019 edition of the RG Business Magazine.