By Patrick Bet-David, Author of The Next Perfect Storm
We have hired a team of actuaries, underwriters and scientists from some of the most well known universities in America to conduct a study on the need for life insurance. After years of intense research, the task force collective came up with a conclusion: 100% of us WILL die, therefore we ALL need life insurance.
All jokes aside, every year in September we celebrate Life Insurance Awareness Month. This year has been one of the best years with agents from competing companies coming together to show the importance of insurance for American families.
With the presidential election only a few weeks away, I wanted to take a different approach to life insurance awareness. The goal is to have one of our major political leaders, from our current President, to republican candidate Mitt Romney, their Vice Presidents, or other influential political leaders, to recognize the role the insurance industry plays in the US economy. Life Insurance agents serve our nation in a similar fashion to how our military does in protecting our great nation. Very little attention is given to both honorable professions during the good times, but we see the important role they play when crisis hits.
Here are 10 key areas in the life insurance industry that I would to like draw attention to:
1. The Need for More Life Insurance Agents
This is my first point because with a record breaking high of 35 million uninsured households in America, the industry needs to attract new agents. According to LIMRA, “six in ten consumers don’t recall being approached to buy life insurance in the last two years.” A reason for this is because we no longer have as many agents as we once use to have. In a Wall Street Journal article, it showed that the total number of licensed agents from 1974 to today has declined from over 500,000 agents to only 174,000. Furthermore, the average age of an agent is 56 years old and therefore they are on their way out of the industry. This is one of the main reasons why I decided to write a book called “The Next Perfect Storm” to illustrate how 5 current conditions have combined to create the best timing to get involved in the insurance industry.
2. How the Life Insurance Industry Affects U.S. Unemployment
With unemployment rates being one of the hot topics during our presidential election campaigns, I wanted to offer another viewpoint on unemployment in regards to the life insurance industry. According to the U.S. Bureau of Labor Statistics, the insurance industry currently employs 5.7 million people, which makes it 3.7% of our total work force in America. Therefore, without the life insurance industry our current unemployment rate of 8.3% would actually be 12%. The impact the industry has on our economy is a message that is rarely told. I’m curious to see if our political leaders fully understand the important role a life insurance agent plays. Everyone in America is directly or indirectly protected from tragedies because of what many heroic agents in the industry do.
3. Annuities and Retirement
Another hot talking point during the electoral debates revolves around retirement for seniors and the 76 million baby boomers. Does Social Security replace an individuals income for a retiree to live comfortably? According to the Social Security website, ”The program was designed to only replace about 40% of an average wage earner’s income after retiring, and most financial advisors say retirees will need 70% or more of pre-retirement earnings to live comfortably. Therefore, to have a comfortable retirement, Americans need more than just Social Security. They need private pensions, savings and investments.” So the real question is, where does the other 30% of income come from? With most private pension plans disappearing, retirees are looking elsewhere for alternatives. Annuities are one of the vehicles that many retirees are turning to. One in five (19%) retirees receive income from individually purchased annuities. Of these retirees, 37% receive regular monthly payments guaranteed for life. What most people do not know is that Social Security pays about $1.9 billion every day while the life insurance industry pays out on average of $1.4 billion every day. (ACLI)
4. Continuing Education:
Consumers’ lack of knowledge about life insurance is keeping some shoppers from buying. 12% cannot decide what type or how much to buy, while 10% are afraid to make the wrong decision, and 8% admit to not knowing enough about life insurance. Life Insurance Awareness Month is not only about spreading the importance of life insurance but as agents and employees of the life insurance industry, we need to educate everyone, starting with our own friends and family. Although consumer education is important, having a life insurance agent who is well informed about the products the industry has to offer will take all the guessing out of buying life insurance.
5. The Life Insurance Formula
As a consumer who may not have a life insurance agent or may be hesitant to buy insurance today, you still want to determine how much life insurance you really need. Well, there is a simple formula for that that we like to call DIME. And to simplify it even further, let’s use an example of Bob & Mary Jones to illustrate the formula in action.
How much life insurance does Bob need?
1. Income: $60,000 a year
2. Debt: $20,000 of credit card & auto loan
3. Mortgage: $200,000
4. Education: $200,000 for 2 daughters ages 4 & 6
Income ($60,000) X number of years for Mary to replace Bob’s income (8 years) = $480,000
Total of $900,000
The DIME method is the most simple and effective way to determine your life insurance needs.
6. Time to go Shopping
41% of life insurance shoppers said life events – getting married, having or adopting a child, or buying a home – prompted them to shop for life insurance. Although these are great times to buy life insurance, I can’t help but think about the number of young children who are forced to drop out of playing organized sports in school to help support the family by getting a job due to a loss of the breadwinner. More specifically, the story of Lamar Odom comes to mind on how fortunate he was to have the opportunity to continue his dream of making it to the NBA after a sudden loss of his mother, simply because his mother had a life insurance policy that kept Lamar in school. The Life Foundation created a video to tell Lamar’s inspiring story. There is really never a perfect time to buy life insurance because no one has yet found the technology to predict the day we, or a loved one, meet our maker.
7. Life Insurance is on Sale
Interestingly, a recent LIMRA/LIFE study found that consumers overestimate the cost of life insurance by as much as three-fold. Most consumers think that life insurance is increasingly expensive, but the reality is actually the complete opposite. Life insurance is cheaper than it has ever been in the history of life insurance due to longer life expectancy. The cost of life insurance is based on life expectancy, meaning the longer you and I live lowers the cost of life insurance. LIMRA also found that, like others, the main reason Hispanics do not purchase more life insurance, is because it is too expensive (64%). Take advantage of the sale by meeting with an insurance agent.
8. Some of the Biggest Advocates for Life Insurance are Women
Seven in ten women agree that life insurance is a necessity and all people should have it. While only 62% of men believe this to be true. It seems that most men providing for their families, don’t spend the time to sit down and discuss the importance of life insurance with an agent. While mothers on the other hand, including working wives, seem to understand that life is about calling “time outs” to take time to do the important things instead of procrastinating. One-third of wives own no life insurance at all – despite the fact that 7 in 10 households are dual-income households, and nearly 30% of wives earn more than their husbands.
9. Life Insurance Decreases Taxes
Taxes are another topic that presidential candidates always debate over. My argument here is that life insurance indirectly prevents taxes from going up. Imagine a homemaker raising three children, experiences a sudden loss of her husband who is the only income earner. Now picture the husband not having a life insurance policy in place with only $20,000 in total savings. How quickly do you think the mourning wife will go through that $20,000? Funeral expenses, burial, mortgage, day care, car payment, credit card debt, car insurance, food, clothing, schooling, utilities, etc. Now the wife needs to figure out how quickly can she replace that income. These are all issues that come up with a loss of a breadwinner in a family. But where does she go from here? Government assistance programs? Who pays for that? You and I do through taxes. What happens to taxes if this case is multiplied by thousands of similar cases? The burden is left on us – taxpayers. So instead of increasing taxes to support more government assistance programs, we need to increase awareness about the importance of families protecting themselves against a loss.
10. The Silent Flag Carrier of the U.S. Economy
Did you know that life insurers have $4.5 trillion invested in the U.S. economy, making it one of the largest sources of capital in the nation? How often do we hear about this fact? To put this in perspective that would be the equivalent of 300 million Americans (approximate population) invested $15,000 per person in to the economy. And that’s just the beginning. The life insurance industry is still on the cusp of a boom, or as I like to call it, The Next Perfect Storm.
We need your help to create awareness. With the presidential election going on I would like to create an initiative to hear some of our politicians and presidential nominees recognize what the life insurance industry has done for our country and economy. Lets create a trend on Twitter & Facebook with this blog by reposting it to any of our leaders that you may admire on either side of the party. Left or right, Democrat or Republican, Liberal of Conservative. Lets get our leaders to recognize Life Insurance Awareness Month.
Here are some key political leaders on twitter: @paulryanvp @mittromney @senjohnmccain @ericantor @johnboehner @GOP @karlrove @foxnews @barackobama @michelleobama @marcorubio @repronpaul @clintontweet @ricksantorum @glennbeck @seanhannity @andersoncooper @cnn @nytimes @reuters_biz @wsj @latimes @msnbc @cbsnews @abc @michelebachman @thehermancain @newtgingrich
Please share any personal stories you may have on how life insurance has affected your life in the comments below.