The Costco Connection - September 2015

By Christina Guerrero

DON’T JUDGE ME, but I have to admit I didn’t acquire life insurance until I was in my 30s. I was intimidated, and I didn’t realize how affordable it could be. But I finally woke up and realized my family would be in a real financial bind without my monthly income if something ever happened to me. Apparently, I’m not alone.

Eighty percent of consumers misjudge the price for term life insurance, according to a 2015 study by LIMRA, a financial services research trade association ( limra.com). Two-thirds of Generation X and Millennial consumers have refrained from buying life insurance because they overestimated the cost; Gen Xers overestimated the cost by 119 percent and Millennials overestimated the cost by 213 percent.

“In addition to believing life insurance is
too expensive, our research has shown that
consumers are intimidated by the process of
buying life insurance—four in 10 don’t know
how much they need or what to buy,” says
Todd A. Silverhart, corporate vice president
and director of LIMRA. “Having a better
understanding about the factors that influ-
ence pricing might help consumers feel more
confident and encourage them to pursue get-
ting coverage they believe they need.”
While Americans know the importance
of life insurance, they tend to prioritize other
short-term expenditures, according to the
study. Fortunately, there are ways to help you
determine the amount of coverage your fam-
ily may need to meet financial obligations
upon your death.

“Determining how much life insurance
you need is perhaps one of the most confusing
questions for people,” says Aaron Seurkamp,
senior vice president in the life and annuity
division at Protective Life Insurance Company.
“At Protective, we really want to ensure people
have the right information to make confident
decisions. It’s all about helping people deter-
mine what is right for their needs.”
Many variable factors go into determin-
ing the best policy type for your family, so
meet with a qualified insurance agent or
financial adviser who can review your family’s
debts, assets and financial goals, and provide
you with a solid estimate. Protective suggests
considering the following tips before deciding
how much life insurance you need.

• How much money would your family
need each month to maintain their current
standard of living? Begin by reviewing your
monthly bank statements and looking at how
much you actually spend each month.

• What assets do you have in your savings account and in your investments, such as your 401(k)? Do you have life insurance policies, and, if so, what are the policy limits? Next, figure in your debts to get an estimate of how much life insurance you will need. You might find that you don’t need to replace all of your income based on these findings.

• Think about how much debt you’re carrying, including your mortgage. If you have substantial debt, be sure to factor it into your life insurance calculation so that your family will have enough coverage to pay it off. Start by reviewing your monthly budget. Consider how long it will take you to pay off car loans, credit cards, etc.

• A stay-at-home parent caring for young children is often seen as not needing life insurance. The fact is, even a stay-at-home parent who isn’t drawing a paycheck may still need life insurance. Think about the estimated costs associated with having to hire a full-time caregiver for your children if your spouse should die.

• Many people become fixated on income replacement and forget to include additional expenses unique to their situation, such as funeral costs, final medical bills, the cost of college, care for special-needs children or even funds for taking care of an elderly relative. Think about how much these additional expenses can add up, and include them in your calculations. C

The Costco Connection Costco Services offers life insurance through Protective Life Insurance Company. For more information, visit Costco.com and enter “life insurance” in the search box, or call (844) 740-5433.