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Budgeting for life insurance - costs in context

Consider this — if you were to rank your financial priorities, where would life insurance land on that list? All too often, misconceptions about the cost of life insurance deter employees from purchasing coverage that could protect them financially. This is particularly true of young people who tend to prioritize other purchases. In fact, 57 percent of millennials feel that paying for internet, cell phones, or cable is more important than purchasing life insurance.1 In reality, life insurance is likely more affordable than you think and it’s best to be prepared for the unexpected. 

A major myth about life insurance

A common reason for not purchasing life insurance is due to overestimating the cost. On average, consumers guess the cost of life insurance to be three times the actual amount. Again, this perception is even stronger among millennials, who overestimate the cost by five times the actual amount.2 To put this into perspective, the weekly premium for a Trustmark Universal LifeEvents policy in the amount of $62,874 is only $8/week.* Think about something you regularly spend $10 per week on or more…could you live without it or reduce the amount you’re spending to afford a life insurance policy?

Where and how you can save money

Fortunately, budgeting for life insurance is probably easier than you think. To make some room in your budget, consider what you regularly spend your money on. Here are some areas you may want to take a look at – small changes may be all you need:
  • Coffee: 25 percent of Americans spend $11 or more each week on coffee.3 If you’re a coffee drinker, consider making coffee at home or purchasing less expensive drinks. 
  • Takeout: We spend about $175 each month on takeout and another $175 per month buying lunch.4 You could save money by hitting the grocery store and brown bagging your lunch instead.
  • Impulsive online shopping: Impulsive purchases account for $108 of monthly expenditures while online shopping drains $85 monthly.4 Step away from the laptop!
  • Tech/ Entertainment: Cable can cost around $90 per month, while TV streaming services are about $23 per month. On average, we spend $23 each month on phone apps and another $22 on music streaming. Take a look at which services you use the most and narrow it down to one or two. You probably won’t notice they’re missing.4
If you struggle with saving or knowing where your money is going, there are also plenty of  budgeting apps that can help. Some of them track your purchases while others actually take small increments out of your checking account and deposit them into your savings. Do some research and see which ones makes the most sense for you!

Why is life insurance worth budgeting for?

Should you pass away unexpectedly without a financial safety net, you could be placing a large financial burden on your family members. If you currently have a family of your own or plan to have one, there is an even greater need for life insurance. As of 2017, 78 percent of Americans with full-time jobs lived paycheck to paycheck.5 So, it’s no surprise that of people without any life insurance at all, 62 percent would be in immediate financial trouble if a primary wage earner died.6 To protect your family in these circumstances, it’s important to prioritize budgeting for life insurance.

Even if you do have life insurance through your employer, it may not be enough. Typically, employers only pay one to two times your annual salary, but financial experts recommend having five to seven times your annual salary.7 Take a good look at your family and financial situation to understand how much life insurance you need versus how much you currently have.

When it comes to purchasing and prioritizing life insurance, keep in mind the value of a TV show or fancy coffee drink in comparison to the value of feeling at ease knowing that your family is protected. Making small changes to budget for life insurance could have a big pay off in the long run.  

1 LIMRA'S Life Insurance Barometer Study, 2017
2 LIMRA's Life Insurance Barometer Study, 2018
3 "Acorns 2017 Money Matters Report" Acorns. 2017
4 “You don’t need that: Average American spends almost $18,000 a  year on nonessentials.” USA Today. May 2019.
5 Careerbuilder. "Living Paycheck to Paycheck is a Way of Life for Majority of U.S. Workers" 2017.
6 LIMRA’s Life Insurance Barometer Study, 2018
7 “Why relying on life insurance from your employer can be a bad idea”. 

* 35-year-old employee (50/50 split, male/female)

Posted on June 25, 2019 in Consumer Life Insurance

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