So often we hear the excuse, "I can't afford to buy life insurance."
The reality is that because life insurance is tied to thoughts of one's own death, there is an automatic mental barrier to its purchase. This can be offset by focusing on the living benefits of life insurance, which today include accumulation of cash surrender value that grows in many ways: interest credited by the insurer, performance of stock indexes or performance of funds that directly invest in various markets and companies. These funds can be utilized for emergencies or to provide retirement income.
In addition, many insurers add riders to the policy for very little cost that will allow a portion of the life insurance benefit to be "taken early" to provide for assistance if qualifying long term care is needed (at a lot less cost than typical stand-alone long term care insurance).
But, back to the basic question. It is not whether you can afford life insurance; it is how much life insurance can you afford. In making that determination, consider what is protected by buying a policy: family, business, retirement. Are you the most important person to be insured with limited resources? Is it more important to insure a working spouse, for example?
While permanent life insurance generally offers the most flexibility and value over the long term, term insurance will allow a larger purchase over short periods of time, usually up to 20 years (permanent insurance may be a greater value for longer periods).
You have probably heard radio ads about low cost term insurance. For the most part, the message is correct. There are many carriers offering low cost term insurance. In many cases, the same policies that are advertised on radio are available from your own insurance representative. You can often buy a policy for as little as a few cents per thousand per month.
The question is not whether you can afford life insurance. It is a two stage question: (1) how much do you need and (2) what budget can you put together. Even if the budget won't buy what you need, whatever you can buy gets you closer to the protection that matters. Something you can build on.
Don't not buy because you cannot afford the policy recommended or needed. Buy some amount to protect those who would face economic loss if you were to die. Less is better than none.
If you would like more information on this subject, or have a client who might benefit from a discussion about it, please contact Barry Koslow at bkoslow@mkaplanners.com or (781) 939-6050.
Securities offered through Advisory Group Equity Services, Ltd., Member FINRA/SIPC. 444 Washington Street, Woburn, MA 01801 (781) 933-6100.
This article should not be considered as providing accounting, business, financial, investment, legal, tax, or other professional advice or services. It is not a substitute for such professional advice or services, nor should it be used as the basis for any decisions or actions that may affect your business or you personally. This should only be one part of your research. You should seek authoritative guidance from a qualified accountant or attorney before taking any action.
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