I was recently out for dinner with Dave, a good friend of mine. He brought along Stuart, whom I had never met before. During a conversation, Stuart asked what I did for a living. When I mentioned that I was a life insurance advisor, he pretended to stick a knife in his chest. “Oh…I’m taken care of”, he said, “I have a sweet insurance policy I took out years ago. I’m good.”
A few minutes later, Stuart asked me to “pretend” that I was meeting with him to discuss insurance. The conversation continued with a series of questions on his marital status, number of kids, income, and so on before we started into the insurance specifics:
“Did you get mortgage insurance through your lender?” I asked.
Pause…Followed by an uncertain, “Umm… sure…..?!”
“You told me you have life insurance… how much?”
Blank stare. “Umm, not sure.”
I continued, “When does it expire?”
“When does it what?”
I repeated the question “when does it expire?”
What exactly do you mean by “expire”? He replied slowly.
“Do you know where your policy is?” I questioned.
“Oh…I have NO idea….is that bad?” He answered sheepishly.
Stuart asked that I meet with him and his wife to review their insurance. According to their term life insurance policy, they had 8 months before the premium increased from $54 per month to $406 per month for the same amount of insurance; This is typical of Term insurance – on renewal (usually every 10 or 20 years), it increases substantially. Needless to say, they were unpleasantly surprised.
We talked more about their insurance needs, what types of insurance products were appropriate for their situation and how they work.
There are a few morals to be learned from this true story:
One – review your insurance from time to time.
Two – know what type of insurance product you have and how much.
Three – make sure you understand if an insurance product is “guaranteed” or not “guaranteed”.
When it comes to insurance, here are the basics:
Term insurance is contractually guaranteed by an insurance company to typically increase in price at each renewal and eventually expire. Whole Life may also not be guaranteed. Permanent insurance should never expire and guarantee a payout.
Call me at (416) 887-7800 or send me an email at firstname.lastname@example.org if you aren’t sure what you have, when it may expire or if it’s still appropriate for your particular situation.