Can you remember the last time you bought a new mattress? The difference between shopping for most things and shopping for a mattress is that we’re not sure how to price one - for most of us; it has been ages since we bought our last one and we have no reference point. Most folks just head out to a mattress store, lie down on the mattresses in a good price range and then rely on the salesperson’s honesty and expertise. It is not as if we can ask the salesperson to cut it open to see how it is constructed and the materials used… so that we would know what we’re looking at. Our final decision is usually the one that feels the most comfortable.
Interestingly, this is a lot like buying life insurance. There is only one difference, but it is a big one. How long does it take you to figure out you have bought a bad mattress? One night? One week? And usually, you can return it with very little or no out-of-pocket expenses. But how long does it take you to figure out you bought a bad life insurance policy? The alarming answer for most people is not for decades and only when it’s too late.
We recently had the honor to be inducted into the Forum 400, which is comprised of “the” very best minds in the life insurance business. One of the key note speakers spoke in-depth about the inner workings of a policy and that there are really no two alike. You can take the same policy written on the same day on two different lives and one may be in great shape after 15 years, while the other is in jeopardy of lapsing, which means losing your insurance regardless of whether or not you paid your premiums.
There exists a very interesting environment for life insurance these days. On one hand, life expectancy is increasing, which would allow one to assume prices would go down. On the other hand, interest rates have been on a downward trend over the past 30 years and have stagnated, which makes prices go up. And of course, there is underwriting. Believe it or not, underwriters are even looking at your Facebook account before issuing a policy. If you say you are a non-smoker, they want to verify it. Technology is increasing accuracy. So what does this mean for the owner of an existing life insurance policy or someone who needs to buy one?
Let’s start with existing owners – it’s time for you to cut into your mattress and see what’s going on. It is absolutely imperative you treat your life insurance like your investments. You analyze it annually at the very least. This doesn’t mean you just read your statement. It means you request to see the inner workings of “YOUR” policy based on “what is specific to YOUR policy.” Remember, insurance is just like a piece of Swiss cheese. You must identify the holes or else you may wake up one day with a notice your policy will be lapsing after years of making premiums.
Buyers beware! Don’t get me wrong. I believe life insurance is one of the best tools in life and in some cases, a must in life. It is not only a solution for the obvious, but for so many other things—taxes, business planning, retirement income, liquidity, a conservative investment, an aggressive investment, equalizing inheritances, and more. Yet even if you buy a policy today, you could be buying an “old” policy that is not what you personally need and will inevitably have problems.
Bottom line? Don’t go shop like it’s a mattress and rely on the salesperson’s honesty and expertise. They may not even know what they are selling you. Demand to cut open the mattress and look at all the what-ifs and worst case scenarios inside.
To celebrate our 38th year of working in the life insurance industry, we want to give back a little piece of our years of experience. We are making a limited time offer to cut into your policy with you at no cost. Remember why you bought it in the first place. My guess is that it was because you loved someone and still want to offer them protection. What you don’t know can hurt you, so don’t procrastinate.