By: Mark D. Milbrod, CLU, CLTC
I recently had a conversation with a friend that was in need of some life insurance to protect his family. With the exception of some small amount of group coverage, he basically had no life insurance. This was concerning since he is 38 years old and has three children ages 12, 9 & 7. He is the sole wage earner in his household, has a fairly large mortgage and his savings are modest. It is a logical conclusion to say that if something were to happen to him, his family would surely suffer financially.
He asked me about life insurance and he, like most people, was reluctant to talk seriously about the topic. Before you read on, relax, this is not one of those stories that ends with me telling you that he tragically died and his family was left in financial ruin. He wound up buying some term insurance but it took some convincing on my part. It does prove the point however, that life insurance has to be “sold” and not bought. He really didn’t understand how much he needed and what type was best for him so he could adequately protect his family.
The main objection that kept resurfacing was the cost of the insurance. The “cost“ of life insurance is one of the most convenient excuses to not buy it. The reality is that the cost is very low when you think about it, especially when you understand what it represents. The paying off of a mortgage, income replacement, food on the table, etc. The list can go on and on.
What’s funny is how much money is thrown away on the things that really do not matter. As it turns out, my friend likes his Starbucks coffee every day. His Grande costs him $2.10 every morning before he gets to his office. That’s over $46 per month without even thinking twice about it. His cell phone bill is $173 per month and his cable bill $256 per month. These three things “HE CAN’T” do without and they amount to over $475 per month.
The irony is that if something happened to him, these are just a few items of a very long list that his family would have to do without. For just about the cost of his cup of coffee ($46/mo.), a $1,000,000 term life policy could offer a great deal of financial security.
Ultimately, he ended up procuring $2,500,000 of laddered term policies, some 15 Year and some 30 Year for a total $120 per month. That worked out well for him but it never fails to amaze me how people will so easily shell out money for things like their Cell Phone Plans, Cable TV and even a cup of coffee and not realize the bigger picture.
This example has to do with an old fashioned sale of life insurance but the concept of the big picture is scalable. It applies to almost any sales scenario involving the sale of the products that we provide. It can just as easily be for a large estate planning situation, the funding for a buy-sell agreement or the purchase of Long Term Care protection.
The bigger picture is what matters most. It may be a bigger cup, but it all comes down to the price for that cup of coffee.