I have previously mentioned that it is becoming more and more difficult to come up with fresh topics for this weekly message. I’ve branched out to touch on human behavior issues, as that is at least tangentially related to life insurance, but it still isn’t easy. In coming up with a topic for today, I asked myself “What is the most value I could provide to my readers?”
I decided the most value I could provide is to illustrate the importance of a life insurance review not only for yourself, but also for family members, employees, and colleagues. Why? Because nearly every study shows that Americans, in general, are woefully underinsured.
The following percentages vary from study to study, but only slightly. About a third have no life insurance at all, while close to a third of those that are insured have $100,000 or less.
Now a review usually isn’t going to tell someone who has no life insurance anything that he/she doesn’t already know. The exception could be if they thought they had coverage but the coverage had lapsed. In that case, a review would be an extremely informative, albeit disconcerting, exercise.
The same holds true for someone with a minimal amount of coverage. It is my experience that most people know, at least approximately, how much life insurance they have. The problem is that they haven’t thought through whether that amount is enough for their particular circumstances.
The fact is, life insurance isn’t very high on most people’s list of financial concerns. Meeting monthly obligations is number one on most people’s list, and once that’s satisfied, it’s replaced by college funding and retirement funding. But a review, conducted properly, will at least prioritize financial options.
As important as addressing the face amount is, it is just one of the benefits of a review. Reviewing the beneficiary designations can save untold trouble down the road.
A husband named his second wife as the owner and beneficiary of a policy on his life. The second wife didn’t get along with his adult children, and him, as it turned out, for they later divorced. After he died, his daughter was going through his papers and found the policy.
She had no idea where her father’s ex-wife was living or even if she was living, as no one stayed in touch with her after the divorce. She had no motivation to find her, as the ex was the beneficiary. Had the father done a review at the time of divorce, the policy could have been a negotiated part of the settlement and the daughter could have been named as the beneficiary.
I hope that this information is valuable to some of my readers. Even if only one person uses it as motivation to get his/her affairs in order, I will have accomplished my objective.