True Cost of Life Insurance

cost of life insurance in piggy bank

Dying without Life Insurance Coverage

Sitting in a training session for life insurance agents, I heard our agency manager Al Petrick say, “The best thing that could happen to you as a life insurance agent is to have one of your clients die without life insurance coverage.” I must admit he had my attention. 

He also in our training used a scriptural reference from his Baptist upbringing when he quoted, “But if any provide not for his own and specially for those of his own house, he denieth the faith and is worse than an infidel.” (1 Timothy 5:8). Boy, pretty strong admonition for a young, inexperienced life insurance agent to hear.

Then, Will Rogers, the great humorist, vaudeville actor, and lecturer left this sage observation, “A man deserves to die once without life insurance coverage.” What could he possibly mean by making such a statement?

Why Have Life Insurance?

When one explores these three observations, it becomes apparent the concept of life insurance plays a major role in the economic well being of a society. It is the breakwater wall between the raging economic waves relentlessly crashing against financial necessities of life and the security of a well devised financial plan. Silently it stands at its post until it is called upon to protect and defend some of the most vulnerable who cannot protect themselves against sudden and unforeseen financial windstorms. Then without fanfare it comes to life as it provides money necessary to replace the earning power of those who had the foresight to make it part of their financial planning,  prior to its having an active role in the economic circle of life. Some realized you can’t order a parachute up as the plane is falling.

The Dollar Argument

Some when approaching the discussion of the true cost of life insurance take the tack of arguing how cheap it is to purchase life insurance by quoting a dollar figure for a set amount of death benefit. They try to portray it as being inexpensive like you are getting a bargain on a loaf of bread or a dozen eggs. If you don’t take advantage of purchasing it today you may miss out on some fantastic purchasing opportunity never to be made available again.  The truth of the matter is most people who take advantage of the “bargain buy” never ever actually end up using what they purchased. Less than 2% of those who really do take advantage of the bargain basement sale ever use their purchase.

They may well have used the money to have taken a fishing trip or a visit to Yellowstone Park. At least they would have some fond memories to look at from the veranda of old age rather than just having bragging rights to the purchase they made and the cancelled checks.

The person who never takes the bait to buy into the inexpensive argument may again be the one we should celebrate. Those brave souls faced the wind of uncertainty alone and came through the storm unscathed. They have the bragging rights to having used their financial assets on things they actually used in life. 

The Selfish Argument

Another set of debaters argue that purchasing life insurance is a perfect hedge against financial downturns in the economy. Has anyone during these last few years of tumultuous swings in the market ever said they worry about the guaranteed cash values of their permanent life insurance policies? Historically, even in the market crash of 1929, only 20 out of 250 life insurance companies went into receivership.

This argument still does not get to the answer of the true cost of life insurance, for if permanent plans of life insurance are maintained long enough, the return through guaranteed cash values and dividends will offset the premium paid over the same period. It would appear then there is no true cost of life insurance.

So this cannot be the answer we are looking for. 

The answer to the question will elude us until one looks at the purpose of life insurance to begin with.

Replacement of Earning Power

The three examples mentioned at the beginning of this article have just beneath their surfaces concealed the objective of life insurance. That objective is to have a feeling of responsibility to replace one’s ability to care for financial obligations taken upon oneself based on a standard of living he/she wants to achieve and then the discipline to do something about it, whether they are here long enough to achieve their goal or not. 

Some will be cut short of their aspirations, but that doesn’t negate the fact of those aspirations being left for those left to face the consequences. That may be just why the Apostle Paul spoke so clearly about a person’s responsibility to care for his own. 

Apostle Paul may not have been referring to a life insurance policy, but he sure was addressing the issues life insurance responds to. 

With a little planning and a little foresight one can anticipate present and future financial needs and move to solve those needs. Please give me a bit of editorial privilege here when I suggest you refer to the example of Jesus on the cross when seeing his mother and his beloved disciple standing by, he said unto his mother, “Behold thy son! Then. . . to the disciple, Behold thy mother! and from that hour that disciple took her unto his own home.” (John 19:26-27) Death should not stop the fulfillment of dreams shared with loved ones left living. 

Will Rogers may have been using humor when he spoke of an individual deserving to die once without life insurance, but his point is very clear. If an individual could only see the problems created by an untimely death and know they could have done something about it, they would never be caught dead without it again.

What about Petrick’s remark that one of the best things that could happen to a life insurance agent would be to have one of his clients die without life insurance? Isn’t that pretty calloused?

From one perspective you could see why someone would feel that way but when you put it in context with the purpose of life insurance being to replace earning power, no agent should ever easily give up on striving to have a client see the value of acting on purchasing life insurance coverage. When you see first hand what your work can achieve, you see your work is not done with simply educating a client. In order for the miracle of life insurance to bless someone’s life, a policy has to be issued and kept in force. 

This author’s experience came when a young 40ish mother of eight passed away a month after giving birth to her eighth child from a ventricular fibrillation. She had washed her hands and while they were wet she reached, while still holding onto the faucet, to get some toast out of the toaster. There was a malfunction in the toaster allowing an electrical shock to pass from the toaster to the faucet through her body. 

Even though she wasn’t the main breadwinner in the home, the economic ramifications were immediate. Who would do all the things a mother does in a home? Who would take care of the month old baby boy? Who would do the nursing and doctoring of family members? Who would be the chauffeur to all the school events? Who would do the canning of the family garden? Who would be aware of bargains and buy things in a timely manner? Not to mention the companionship now severed when family issues arose.

Fortunately, this story has a happy ending, for life insurance was in place, and a few years after her passing her husband found a widow of his own age who he married and now lives happily with. 

The True Cost of Life Insurance

This brings us to the answer to the true cost of life insurance question. It is different for each individual but can be summed up in a few words--the cost of all the financial situations which are imposed by an untimely death which are not met by life insurance proceeds. Pretty simple but so profound.

One can argue until they are blue in the face about premiums charged for coverages and that is certainly a factor; but they will still fall short of the true cost of life insurance until they face the eight hundred pound gorilla in the room of unpaid expenses caused by earning power being lost.  

Glen B. Marks, CLU, retired after 42 years of insurance sales and management. Opinions are his own and are not to be construed as legal or professional advice.

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