Financial Horror Stories: Life Insurance with Joy
Last month, I used Halloween as my inspiration to share with you the theme of Financial Horror Stories. And I had one more to tell, so the theme rolled over in November. Last month I shared some client situations and my own where it felt as though we were starring in our very own Financial Horror Movie. Today’s episode is a little different. Joining me today is Financial Gym Trainer and Happy Hour co-host Joy Liu to discuss how life insurance and how you utilize it can create its own financial horror story. We discuss why we think it may or may not make sense to have it, when it makes sense to cancel it and what to do when you’re faced with the painful decision of deciding whether or not to continue paying into a horrible scenario and when you walk away. This is an important episode for anyone who has or is considering whether or not life insurance should be part of their financial health journey.
What are we drinking?
Joy - Water
Shannon - Black Cherry Schweppes
Podcast Notes
A Financial Horror story Trainers often see at The Gym relates to life insurance. There are two versions of this: when someone doesn’t have it and something happens, and when you have a policy that you don’t need and isn’t providing value.
Life insurance, like all insurance, is about risk management.
It is sound financial planning to have life insurance and provides peace of mind.
According to Investopedia, ‘Life insurance is a contract between an insurer and a policy owner. A life insurance policy guarantees the insurer pays a sum of money to named beneficiaries when the insured dies in exchange for the premiums paid by the policyholder during their lifetime.’
Who life insurance is a great fit for:
if you have a spouse or children who depend on your income.
If someone has cosigned your private student loans.
If you provide for your relatives financially and they depend on that money.
If you’re starting a business that will impact your personal financial situation, like not having retirement or other funds to pass on to your family.
If you’re single now, but plan to get married and have a family in the future. Rates are lower now, so if you can afford it, getting it now can be a great option.
There are two different types of life insurance: Whole Life and Term Life
There is a small percentage of the population that truly benefit from Whole Life insurance. For folks with estates $13.5 million or larger, a Whole Life policy can take care of the estate tax.
The Financial Gym is a really big fan of Term Life Insurance. It is hard to lose folks at any stage of life, especially before 65 and it can be difficult to have these conversations. It’s important to plan because it will prevent challenges for the people left behind.
If Whole Life isn’t a great fit for most, why do people have it?
The people who sell it know how to sell it. They are masters of the talking points. Sometimes these folks call themselves ‘financial planners’ and the tactics are based on the assumption people aren’t financially literate. It’s often marketed as a ‘savings vehicle’ or it’s something their friend is selling!
Whole life insurance is more expensive generally, and the benefit is significantly less.
For some folks, they feel this is the only way they’ll have access to a financial planner.
The bells and whistles of whole life insurance sound great, but it falls apart pretty quickly when you dig into the fine print.
It’s frustrating because people think they’re doing something really positive for their financial health, but these policies are not a good fit for the majority of folks.
These policies can be tricky to spot because they’re marketed under a number of names such as, ‘universal index,’ or ‘cash value life insurance.’
Before signing any insurance policy, have someone (who is not selling it to you) review it with you and talk through the details.
Once you’re in one of these policies, getting out can be challenging, but there are options. Run the numbers, and don’t fall for the sunk cost fallacy. Sometimes it’s better to walk away.
Don’t let life insurance become a horror story in your life. If you have questions, reach out to The Financial Gym to talk through it!
Exploring Life Insurance
Check out Policy Genius to learn more about Life Insurance
Check out Trainer-on-Demand to talk with a Certified Financial Trainer about Life Insurance
Takeaway: My biggest takeaway is to not let sunk costs dictate your future decisions. It may seem like a financial horror story to contribute funds into an account and not ever see them again, but everything you do financially is fixable and you can always recover from a financial decision that may not have made the most sense for you.
If you have any topics you would like me to cover on this podcast, or if you’d like to get in the financially naked hot seat, I encourage you to email me at Shannon@fingyms.com, or join the private Martinis and Your Money Facebook group, and let me know what you want to hear.
We are fast approaching the end of another year and we need to start preparing for a new year. If you or someone you know would like to have a supportive best financial friend along the ride with you for this journey, please check out financialgym.com. With memberships starting as low as $35 a month, we are the inflation-proof source for financial wellness for anyone. So head over or send friends to financialgym.com and schedule a warm up call today. As a reminder, our warm up call team is staffed with amazing and current Financial Gym clients that can answer any of your questions about our program.