Wealth Building: The High Cost of Low Coverage Life Insurance

By: Bernard Lee

CORAL GABLES – More than 40% of U.S. households believe that either they need to buy life insurance or they need to increase their existing coverage.

The average difference between the amount of coverage they think they need and what they actually own is about $200,000.

According to the 2007 Ariel-Scwab Black Investor Survey, outside of 401(k) plans or other employer sponsored retirement plans, African Americans place life insurance just below savings accounts in order of importance.

My question for you is, do you own enough?

Why do people who know they are underinsured fail to address the shortfall? The decision to buy life insurance goes far beyond dollars and cents. Here are some common objections to purchasing life insurance. Do any of them sound familiar?

“It won’t happen to my family or I can’t afford any more insurance.”

Data released by the Centers for Disease Control and Prevention’s (CDC) National Center for Health Statistics (NCHS), in “Health United States, 2006,” finds that life expectancy in the United States was the highest ever in 2004. It actually increased for African-American men (to 69.5 from 69.0) and for African-American women (to 76.3 from 76.1). Some of us may question the slight rise in mortality but nonetheless, you probably know of someone who died young and left dependent family members behind. It might not happen to your family, but what if it does?

Regardless of the cost, you wouldn’t dream of going without car, homeowners, and health insurance coverage. But the cost of your not carrying adequate life insurance could be far more expensive to surviving family members than the cost of the additional premiums.

The cost of losing a breadwinner can be costly and a surprising number of US households are not prepared for the unexpected death of the head of household:

– 25% — Heads of households don’t have a strategy to provide their families with a decent standard of living.

– 15% — Households would have difficulty paying expenses within a matter of months.

– 12% — Households would have immediate difficulty paying everyday expenses.
(LIMRA, June 2006)

After 10 plus years in financial services, I’ve heard all the excuses. “It’s too complicated or I don’t have time today.” There’s no doubt that buying life insurance takes some effort. In our busy world, it’s easy to find something else that seems more pressing. But as we get older, life insurance gets more expensive and there is an increasing chance that health issues could complicate the purchase.

The cost and availability of life insurance depend on factors such as age, health, and the type and amount of insurance purchased. Before implementing a strategy involving life insurance, it would be prudent to make sure that you are insurable.
As with most financial decisions, there are expenses associated with the purchase of life insurance. Policies commonly have mortality and expense charges. In addition, if a policy is surrendered prematurely, there may be surrender charges and income tax implications.

If you currently own a life insurance policy over two years, are paying premiums in excess of $2,500 and have experienced any health or lifestyle improvements, you should consider a “life insurance audit” on your current policy. The audit is an objective system that measures the effectiveness of your current policy. The audit will either give you “peace of mind” regarding your current policy or give you better options regarding your current situation.

Bernard Lee
Managing Director, Larus Wealth Management

For questions or more information on life insurance options, please send via email to, call 877-LAURUS-6 or write to Bernard Lee, Laurus Wealth Management, LLC, 2332 Galiano Street, 2nd Floor, Coral Gables, Florida 33134. Securities and Investment Advisory Services Offered by H. Beck, Inc., Member FINRA/SIPC. Laurus Wealth Management and H. Beck, Inc. are not affiliated.

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