Webinar: When and Why Do I Need a Life Insurance Policy?

Hosts: Tony Cervone, Director of Sales—Connecticut, Bearingstar Insurance;
Dan Storer, Insurance Consultant, Bearingstar Insurance

Tony Cervone: Welcome and thank you for tuning in. We thought we’d start off with some quick introductions and tell you folks a little bit of our backgrounds. My name is Tony Cervone. I am the sales director for Bearingstar Insurance here in the state of Connecticut. I joined Bearingstar back in August of 2012, so just a little over 12 years ago, but I’ve been in the insurance and financial services industry for almost 25 years. Eighteen of those years, I was involved with life insurance in some way, shape, or form—whether I was selling it myself or managing a team of folks that was selling it to the public on behalf of myself and the agency that I worked for. I started back with New York Life, where I first got introduced to life insurance and mutual funds. I then progressed to Liberty Mutual, where I learned more about auto, home, and umbrella insurance, and finally found a great marriage of all those products here at Bearingstar Insurance, and now we can offer all these things to you folks. So that’s what brings me here today. Lucky for you, I’m joined by my friend and colleague, Dan Storer, who’s way more versed about this stuff than I am. So, Dan, please say hello.

Dan Storer: Hello, everyone. My name is Dan Storer, and I started working in the insurance industry—particularly life, health, and disability—back in 2017 for an independent brokerage firm out of Southington, Connecticut. My story of Bearingstar started in 2020, and I actually worked for the life department for the first year. Currently, I am primarily focused on personal lines, home, and auto. That being said, I still always keep my ear to the ground for any latest changes and updates in the life insurance industry.

Tony Cervone: Thanks, Dan, and I can’t think of a better way to finish up September. Some of you may or may not know this, but September is Life Insurance Awareness Month, and you’re here because you are our customers currently enjoying either auto, home, or umbrella—hopefully all three. But we also wanted to make sure you’re aware that Bearingstar is a full-service agency. We are passionate about people. It’s literally our mission to make a positive difference in people’s lives. We can’t do that if we’re just protecting your things—your auto or your home. We also want to protect your family and your legacy that you want to leave them, in the form of life insurance products, so we have those to offer and we want to make sure you’re aware of that today.

Before we do that, we want to understand the basics of life insurance. What is life insurance? By definition, it’s insurance that pays out a sum of money either upon the death of the person insured or after a set period or term. There’s a ton of different products out there. Dan and I have sold a lot of them: variable life, fixed annuities, universal whole life. Depending on the complexity of your financial situation, there’s complex products out there for you, and we have insurance consultants that are versed in all those to help you with that.

For the sake of today’s conversation, we wanted to keep it as basic as possible with the two types of life: whole life and term life insurance. And I can’t think of any products that are more aptly named than these. Whole life is just that—it protects you your whole life. And we’ll get into that a little bit later, but that’s more of a legacy kind of product for your final expenses kind of thing, and we’ll get into a couple more details in the latter part of this.

Term insurance is the other one. It’s exactly what it’s called: It protects you for a certain amount of time or an agreed-upon term. Once that term is over, you no longer have that premium obligation, but you also don’t have that product anymore. Some people kind of consider this renting versus owning, and it can be compared that way. We’ll get into some of those details later on. What we want to discuss is how life insurance works, and Dan’s going to be able to do that for us.

Dan Storer: All right, thanks, Tony. So, yeah, the basic structure of a life insurance policy and how it pays out is fairly simple. Basically, a life insurance policy is an agreement between you, the insured, and an insurance carrier, and that agreement is upon a death benefit or a monetary sum. So, that gets paid out to your loved one or loved ones in the event that you die an untimely death or die within the policy period. So, how does it work? How do you get the process going? Once you talk to your consultant and you tell them what you want the policy amount to be, the first step is approval. Now, the approval process, whether it’s term or whole life, is going to require a physical exam and some bloodwork. And this is also going to come into play—usually, they’ll ask you up front if you’re a tobacco user, but they will see nicotine in your system if you are. To be considered a non-tobacco user in terms of life insurance ratings, you’re going to have to be nicotine-free for a year. That being said, if you smoke a cigar occasionally, you can be rated an occasional tobacco user so the rates aren’t as bad as for a tobacco user.

On the flip side, not all life insurance policies require a medical exam. The best example of this is if you have an employer-provided life insurance plan. While it’s nice that you don’t need a medical exam—it’s a guaranteed issue—those policies, 90% of the time, tend not to be portable. That means that if you get fired from that job or retire, that policy stays there. You cannot take it with you. Now, the payout structure is, again, pretty straightforward. You, the policyholder, make regular payments to the insurance carrier in exchange for the death benefit. The death benefit can be paid out in a lump sum, like it usually is, or sometimes it can be paid out gradually in forms of almost annuities. Generally speaking, lump-sum payments are not subject to income tax. However, annual payments—especially if they’ve accrued any interest—can be taxed.

Tony, do you want to go into some of the reasons why one would need a life insurance policy besides the obvious financial security?

Tony Cervone: Sure. One of the main reasons people get curious about it is for debt coverage. So, why do you need a life insurance policy for debt coverage? Typically, the most common ones are for mortgage protection and college payments, your ability to outlive the risk of not being there to pay for your child’s higher education. With mortgage protection, it’s a little bit more complicated. Any of you here that have bought a house know that immediately after the closing, you start getting inundated with mortgage protection insurance flyers, or MPI. Some people think that’s homeowners insurance—it’s not. We’ve got you covered for that part of it. Some people think it’s a different kind of insurance altogether—it’s not. It’s a fancy way of saying term insurance.

With MPI, or mortgage protection insurance, the difference is, you lose a lot of that control. The control is held by the bank that you choose to insure with. They decide they’re the beneficiary because they’re really just looking out for the loan to be protected. They want to make sure they get their money. You and your loved one or your beneficiary may decide that’s not how you want to disperse that money. You might want to pay off your mortgage, you might want to pay for half your mortgage, you might want to not pay any part of your mortgage and continue making those monthly payments if you’re able to—but you get to make the call. So, if you insure with a company like ours, you have way more control over your term policy, and it’s typically a 30-year policy because you have a 30-year mortgage—unless you’ve been able to refinance it to a 15, which we have products for as well.

The next one is for college. Again, protecting the need to make those college payments. If you take a look—and we have a website that you can look at right now at www.educationdata.org. It’s the Education Data Initiative. The average cost for colleges in-state is $27,000 per year, or about $108,000 over the course of four years. If you’re an out-of-state student, you’re looking at more like $45,000 a year, or $182,000. And if you have that very gifted kid that wants to go to that nonprofit private school, that jumps up to $58,000 a year—almost a quarter of a million dollars for life insurance. So those are really big numbers that require the right protection. That’s what a lot of term policies are useful for—that debt protection. Again, that temporary need, once you’ve outlived that need to pay those, that insurance policy goes away and so do your premiums.

The other reason that I think is one of the biggest ones is legacy and estate planning. That falls back into that whole life category. Typically, your funeral or final expenses that you don’t want to burden your loved ones with, we’re building up a cash value. Whole life policies have that feature where you’re making typically higher payments because whole life is going to be more expensive than term, if we’re comparing apples to apples. And most of these companies that offer a whole life like we have will offer some sort of dividend or interest rate, so you do build up some sort of cash value along the way, where you can leave that as a gift for somebody or choose to continue to make payments and have that legacy planning in place.

For the burial expenses, people will sometimes keep a small whole life policy, just because even if it’s not that much money, it’s something that their kids don’t have to be burdened with paying out of pocket for. Right now, the traditional funeral/burial national average is about $10,000 if we’re doing the full service. The full-service cremation is typically a little over $7,000. And there’s something called an affordable burial—for those who aren’t able to pay for the traditional one—and it’s going to still be about $6,000. Then a direct cremation, which is basically your no-frills cremation, is going to be just about $3,000. So, again, some of these you might consider to be big dollars or small dollars—either way, it’s not something you want your kids writing a check for. There are a couple other reasons, too, Dan, if you want to go over why you need life insurance.

Dan Storer: Yeah, so a big one is income replacement. And many families—especially if there is a single bread earner—they usually have a life insurance policy on themselves because they are the one that makes the income. However, a lot of times, these households do not have a life insurance policy on the stay-at-home spouse, and many people—until that stay-at-home spouse or significant other passes away unexpectedly—do not realize how expensive or the worth of that salary is. As of April 2024, the average salary worth of a stay-at-home spouse in Connecticut was anywhere from $62,000 a year to $184,000 a year. And that may sound like a lot, but sit back and think of the duties of a stay-at-home spouse. All of those things are going to have to be outsourced—cooking, cleaning, laundry, taking kids to events, daycare.

Keep in mind that stay-at-home spouses work 365 days a year, and that includes holidays. Again, if you’re going to be outsourcing that, you’re going to have to be paying that person extra to work on weekends, if needed, and to work over holidays. Some of the numbers—if you would have to pay for these if your spouse who stays at home passes away unexpectedly—are pretty astounding. The average cost of infant and childcare in Connecticut—this is per infant—is almost $14,000 a year; $13,880 per year is the average. For a toddler, it’s $12,731 per year, so about $13,000. These are prices per child—I cannot drive that home enough. So, if you have three kids, that’s a lot of money. For example, let’s say you have two kids that are in the age bracket of preschool or daycare and your stay-at-home spouse passes unexpectedly. You’d be on the hook for anywhere from $25,000 to $28,000 a year just for daycare costs alone.

Last and certainly not least, one of the most important reasons why one would need a life insurance policy is peace of mind. It’s the emotional and psychological benefits of knowing that you’re covered. You’ll probably sleep easier; your blood pressure will probably lower, which could extend your life. But in all seriousness, no one likes to think about when they die, but wouldn’t you like to think about that—if you do die unexpectedly, that your loved ones will be covered? They’ll have a roof over their heads; they’ll have a future in education, if that’s what they want; and they won’t have to worry about changing their lifestyle.

Tony Cervone: We’ve covered the why, and, you know, those are pretty clear. It’s really the when, also, that starts making you think about “When do I need to start talking to a professional?” And the when can vary from young professionals starting off in their career and building their financial security. Married couples—the minute you start thinking it’s not about you anymore and become a little less selfish and more selfless, you start thinking about the financial protection of your partner. New parents—guess what? It’s even less about yourself now because now you’ve got to take care of the future of your children. Homeowners—triggers people that their first and probably biggest debt they’re going to have—makes people think about it. Then finally, retirement planning. So, those typical life stages are when we find people start talking to us about these products, and then Dan actually knows some trigger events that trigger those conversations as well.

Dan Storer: Yeah, so a lot of these triggering events are the result of these life stages that Tony’s just discussed. One of the big ones is you get married. The next step is you buy a house together, and then you might have children together. For those that are not married and are just career-driven and they don’t want to have any kids, well, think about that, too—your career milestones. Did you get a raise at work, or did you get a new job that has higher pay? Do you have any nieces or nephews that you think would benefit from education if something were to happen to you or a legacy that you would like to leave with them?

A big one is before changes in your health or your financial situation. The younger you are, the better it is to get a life insurance policy in place. You’re probably going to be in pretty good health, especially if you’re not a tobacco user. The older you are, the more expensive it gets. It’s as simple as that. But another big reason to do this is if you start to notice your parents are having changes in health, and this is where your family medical history comes into play. Let’s say, for example, you have a family medical history that your dad—you’re starting to see it now in your dad. It happened to his dad and his grandfather: When they all entered into their mid-50s, they started to have health or heart-related issues that could be heart attacks, just high blood pressure, diabetes, or cancer. If you start to see these changes—let’s say you’re 30 and your parents are in their mid-50s—now would be a good time to get a life insurance policy in place before any of these ailments could potentially affect your life.

I’d like to go into some of the common misconceptions and myths about life insurance. One of the big ones is, people think it’s too expensive. It’s not. We have access to two life insurance brokers that each have access to over 50 different carriers. We have a product for anyone’s lifestyle or budget. A lot of people say, “I’m too young,” which I just explained that you’re never too young to get a life insurance policy in place. Many think they’re too old, but to echo what Tony said at the beginning, people are living longer and if you are in relatively good health and you’re not a tobacco user, you will pay more for it. It’s definitely not going to be as cheap as if you’re 30 years old, but there is a policy out there for you. And, again, as I said, many single people think they do not need a life insurance policy, but you could have a niece or nephew that you’d like to gift something to, or a nonprofit that you believe in. You could set up a trust for a nonprofit for a life insurance payout.

I want to talk about what we as humans insure. We insure our home—88% of the U.S., the homeowners, have some sort of insurance on their house. Our cars—in the U.S., 87% of drivers have auto insurance, 13% being uninsured and, just a little insurance tip: Mississippi has the highest amount of uninsured drivers at 29%, so maybe stay out of that area for your road trips. But what about life insurance? Surprisingly, only 52% of Americans have some sort of life insurance policy in place, and of that 52%, males have 11% more policies in place than females, which is astounding. It’s surprising for two reasons: Women live longer, so they’re always cheaper to insure—not cheaper, less expensive to insure. They also make much better decisions than we do, so that’s another reason why they’re easier to insure.

We’re going to use two males as an example for the typical cost of a policy. Let’s say we’re going to use a $500,000, 20-year term policy as our base, and our first applicant is a 20-year-old male in relatively good health who does not use tobacco. His starting rate—he’s looking at anywhere from $250 to maybe $500 a year. On the higher end, a 60-year-old—same 20-year policy, $500,000 death benefit, good health, no tobacco usage—he’s looking at $2,500 a year. That’s a very affordable plan—especially for a 60-year-old—to get in place. But the big one is, a lot of people think, “Oh, I’m a police officer” or “I’m a firefighter, I don’t think I could get a life insurance policy because my job is too dangerous.” All deaths are covered except for suicide. All life insurance carriers have a suicide clause, meaning if you, the insured, take your own life within the first two years of the policy, the death benefit will not be paid out. But there is life insurance for every death except that. We have carriers that specifically work with police officers. There are riders for long-term care if you get wounded by a gunshot, so there’s a product out there for everyone, and it’s not expensive, it’s not out of reach, and everyone should have a life insurance policy.

Tony Cervone: You know, Dan, when I was selling as well, one of the toughest ones I came across was when folks wouldn’t want to talk about insuring their children or getting life insurance on their babies or toddlers. And while it’s not something you ever want to talk about, it is a gift of insurability, really. It’s protecting their needs if they developed, God forbid, some sort of child diabetes or any other kind of medical situation that would make them uninsurable later on in life. Getting that policy for them at an early age is kind of a gift where it doesn’t matter what they develop, they get to keep that life insurance policy for life, so that’s also another one I like to throw in there. How do we begin the process? I always talk about needs assessments. I think folks need to contact their trusted advisor—hopefully it’s us—and talk to them about what they currently have as far as life portfolio and service that we provide here as well. We don’t assume you don’t have any life insurance. Some people do have life insurance and want to review it, and I think that’s always good because the times they are a-changing.

The National Institutes of Health, back in the year 2000, said that the life expectancy average was 76.8 years. In 2019, it went to 79.1. It dipped a little bit with COVID, but that’s almost a three-year difference in the span of nine years. So, the policies became less expensive because humans are living longer. You might want to take that review where you might have a 30-year policy that you’ve been paying into for 10 years, and now you can extend it for longer, for relatively the same price, if not maybe a little bit more. Those are the types of things we look at—and we walk away from a lot of risks as well, saying, “Congratulations, you’re properly insured. I have nothing else to help you with, and I don’t want to over-insure you.” So, feel free to have those conversations whether you need life insurance or whether you currently have life insurance and are looking to get more or review your current policy.

That’s really it for next steps. We did want to open up for some questions. I saw one question did pop up: Who do I contact to discuss a life insurance policy for me? Your trusted advisor—if you do have a current agent, that would be ideal. If not, our customer service number in the state of Connecticut is 888-519-9996. Again, that’s 888-519-9996. And in Massachusetts, our customer service number is 877-801-7424. Again, that’s 877-801-7424.

So, in closing, again, as I’ve said before, we’re passionate about people; we do want to make a positive difference in people’s lives. And we mean this when we say, if you want to secure life insurance, that’s great. If not, we can still just sleep better at night knowing that you’re either talking to somebody else about this important topic or that we did our job as a full-service agency to provide it to you. And at the end of the day, Dan and I wanted to make three things clear on this seminar: Life insurance is not complicated, it’s not difficult, and—bottom line— it’s not financially out of reach, especially if one’s in relatively good health and relatively young. So, we want to thank you guys very much for joining us today. Thank you again for your business, and please reach out to us with any questions. We can always circle back with you later on. Thank you.

Dan Storer: Thanks, everyone.