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Myth-Defying Insurance - Separating myth from reality is the first step in finding a life insurance solution that fits you just right.
By Jack Gordon
Illustrations by Carl Wiens
 You know how a one-size-fits-all T-shirt never really fits all? It’s the same with insurance. What’s good for one is rarely good for all—despite what some would have you believe.
Still, we often fall prey to commonly held myths and generalizations like this when it comes to assessing the role life insurance plays in our broader financial outlook. The bad news: these myths can steer you in the wrong direction. The good news: armed with the right guidance and a bit of “myth-detection” know-how, you can take advantage of this critical tool and make good long-term choices for you and your family.
Beyond A Short-term Fix
If you’re like many who are gearing up for retirement, you may have begun to notice that some of the things you thought you knew about life insurance aren’t necessarily so.
“There is a popular myth that all life insurance needs are temporary,” says Todd Yeiter, director of insurance product marketing for Thrivent Financial for Lutherans. “You’ll only need it until the kids are through college, or only until the house is paid off, or only until you find someone to buy your business, or only until you accumulate enough assets to ensure a comfortable retirement.”
The truth is that the needs and uses for insurance change as you age, but they don’t go away. “There’s always another reason why life insurance makes sense,” Yeiter says. The mortgage isn’t paid off after all. Your retirement savings are coming up short. You have a special-needs child who must be protected. You’re starting to do some serious estate planning and have discovered the advantages of bequeathing insurance money as opposed to other assets.
Kevin Ruebesam, a Thrivent Financial representative in Longmont, Colorado, recommends that you think of life insurance as a tool that has different uses at different stages of life. “I originally had life insurance to care for my kids,” says Ruebesam, 43. “That’s still true. But later I can use it to supplement retirement income, transfer wealth income tax free or multiply a gift to my church or a charity.”
Forget One-Size-Fits-All
Here’s another truth: Your life insurance needs are unique. Any time you hear “always do this” or “never do that” with regard to life insurance, you’re listening to bad advice, says Bruce Fear, vice president of protection products and solutions for Thrivent Financial. Life insurance myths like this are “nothing more than vast generalizations,” Fear says. “They have no place in solving individual problems.”
The only intelligent decisions you can make are those based on your individual situation: your family, your financial situation, your discipline, and, above all, your goals. A good financial professional is one who asks a lot of questions before making recommendations about the types and amount of coverage you might require. Think twice about any financial professional who has the answers before the questions have been asked.
Shifting Needs
What kinds of issues might call for re-examining your insurance needs as you approach your retirement years? A classic one arises if you are eligible for a defined-benefit pension plan. You commonly will be offered a choice between a higher monthly income (say, $1,000) to last for your lifetime, or a lower monthly income (say, $700) to last for your spouse’s lifetime as well. “You’re sometimes better off to take the $1,000 and use the extra $300 to buy life insurance to cover your spouse if you die first,” says Marlin Pruismann, a Thrivent Financial representative in Blairsburg, Iowa. It’s best to consider that option before you reach retirement age, while your health is good and premiums may be lower.
Then there is the matter of income replacement in retirement for a surviving spouse. If a couple is drawing two Social Security checks, one check goes away when the first partner dies. Pension payments sometimes are reduced similarly. Many must rely on life insurance to replace that lost income for the survivor.
Term vs. Permanent
Whatever your goals may be, Thrivent Financial experts agree that the amount of coverage you require to meet them should be your primary consideration, and the type of policy you choose remains secondary. That said, however, as you’re beginning to really put your pre-retirement strategies into high gear, this is a stage when it might pay to take a closer look at permanent insurance versus only term. For one thing, the cash value in permanent policies grows tax-deferred and can provide supplemental income in retirement. And of course, since this is life insurance, it does double duty because it also provides a death benefit.
Permanent policies generally allow more flexibility than term policies, with more potential to skip or increase premium payments or to adjust death benefits. Why might this be important? Yeiter highlights just one of many reasons: “You may be in your prime earning years, but what happens if your company lays you off tomorrow?” he asks. “At 55, what are your prospects of finding other work that pays as well?” This is one of many reasons why flexible premiums can be advantageous.
Also, if estate planning is taking on new urgency for you, life insurance is likely to factor in for a number of reasons. Death benefits from life insurance policies are income tax free, and over time you can magnify the amount you leave to your heirs with a benefit that may far exceed the premiums you pay into a policy. “There is no better way to pass on assets than life insurance,” Pruismann says. This applies whether you are concerned with leaving a gift to your church or transferring a business or farm to one child while being fair to your other children.
More than just a temporary tool to use in your 30s and 40s to protect your family in the event of your death, life insurance has a whole new role to play as you approach retirement. It can be a key ingredient in realizing your dreams, protecting your family and laying the foundation for your ongoing legacy.
Jack Gordon is a writer and editor in Eden Prairie, Minnesota.
Act Now
Need to tailor an insurance strategy to meet your unique needs and goals? Your Thrivent Financial representative has the resources—and the right questions—to help you figure out how you can utilize life insurance to your maximum advantage both now and down the road.
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