Buying Sight Unseen
Purchasing a car and term life insurance online have many similarities. People buy cars regularly sight unseen. You can go to Ebay or a national dealer like CarMax and find a car and have it shipped to you from anywhere in the United States. One of the most attractive aspects of buying a car online is you do not have to see a salesperson. Like a purchase of a car online, buying life insurance online does not require you to see a salesperson either. There are some lessons to be learned from car buying online that can help you when shopping for life insurance online.
If you purchase a car online, you want to see a picture. How do you see a picture of a life insurance policy? What you are insuring is your family’s financial well-being, that is the picture of a life insurance policy.
Let us put it into numbers. With cars and life insurance, size of your family matters. If you have a family of four, you probably will look for a four-door family vehicle. If you have a family of four, your life insurance will need to settle your debts and replace your income if you are not in the picture any longer. Let’s add up a few numbers as an example for a young couple, both earning $50,000 a year.
$30,000 car note. The average new light vehicle priced by Kelly Blue Book is $34,372 [i].
$14,000 household debt. The Federal Reserve says the average household debt is $14,452 [ii]
$157,000 average mortgage. Business Insider reported this information from Experian [iii]
$28,950 average student debt. Reported by the Institute for College Access & Success [iv]
$490,680 cost of raising two children. Reported by The Department of Agriculture [v]
$10,864 Final expense cost as reported by CSG Actuarial & LIMRA [vi]
$253,622 Cost of educating two children at an in state four-year college [vii]
Using the life insurance calculator from the non-profit organization Life Happens and this average debt information you can estimate that one parent’s life insurance needs at $356,278[viii]. If you fill the calculator in with your personal information, you will probably come out with a different number. The $356,278 gives us a point to use as an example. Here is a screenshot of the calculations page so you can see how I arrive at the recommended life insurance amount. This calculator is available for free at www.Advice4LifeInsurance.com
To make our conversation easier, let us round the number up to $360,000. In comparison, if you know you need a four-door car, you now want to look at the reliability of the manufacturer. In selecting life insurance, if you know you need a $360,000 term life insurance policy, this would be the point where you want to look at the suitability of the policy and the financial strength of the life insurance company.
There are dozens of websites on the internet to select term life insurance companies. Most of them require that you provide your personal information before you decide what life insurance company you want. That is why I designed the life insurance calculator on Advice4LifeInsurance.com to offer life insurance company options before you enter your personal information. If you enter in some basic information, you can see which term life insurance companies offer the policy for which you are shopping.
If you are shopping for a car, you do not stop at the price. You look at manufacturer reports and surveys. Most term life insurance sales sites on the internet stop at this point and ask you to sign up. Not so fast. There are more questions to answer. In buying a car, you look at the dependability of the manufacturer. In life insurance, you look at the financial strength of the life insurance companies you are considering. In some instances, there may be several life insurance companies that are only a few dollars apart. If you see a life insurance company that you have questions about, the next step is to visit our ratings page at Advice4LifeInsurance.com[ix]
On that page, I list three of the most prominent financial rating services and the Comdex rating along with their rating of dozens of insurance companies. The Comdex rating takes all four of the most prominent financial rating services and cumulates them into a scale that goes from 0 to 100. The theory behind the Comdex rating is the higher the financial rating, the better the financial strength of the company. Rating services charge a substantial fee for their rating, so not all insurance companies choose to be rated by all four rating services.
You can buy a car and life insurance online, however, that does not mean that you should not speak with the person from whom you are buying. If you found the right car at the right price, the next step that most people take is to call and inquire about the car. That is the same thing that you should do when buying life insurance online. After you have determined the amount of life insurance that you want, found the price that is within your budget, and narrowed the selection of the company down, it is time to complete the application and talk to the person from whom you are buying. You do not have to submit payment to begin the application and you can back out of the application at any time. Even after you buy the policy you have 30 days to change your mind and get a refund. The attractiveness of buying online is that you do not have to meet with a salesperson. It is much easier to say no thank you on the phone. However, remember not to rush through the process. Verification and communication are vital. If you do both, you are well on your way to a smooth transaction and purchase that will protect your loved ones for many years.
References
[i] Kelly Blue Book. "New-Car Transaction Prices Increase Nearly 3 Percent Year-Over-Year In September 2016, According To Kelley Blue Book - Oct 3, 2016." MediaRoom. Last modified September 2016. http://mediaroom.kbb.com/2016-10-03-New-Car-Transaction-Prices-Increase-Nearly-3-Percent-Year-Over-Year-In-September-2016-According-To-Kelley-Blue-Book
[ii] Federal Reserve Bank of St. Louis. Households and Nonprofit Organizations; Credit Market Instruments; Liability, Level - FRED - St. Louis Fed. Board of Governors of the Federal Reserve System, 2016. Accessed October 17, 2016. https://fred.stlouisfed.org/graph/?id=CMDEBT
[iii] Kiersz, Andy, and Libby Kane. "Mortgage Balance State Map." Business Insider. Last modified October 14, 2014. http://www.businessinsider.com/mortgage-balance-state-map-2014-10
[iv] Institute for College Access & Success. "State by State Data 2015." Project on Student Debt. Last modified 2015. http://ticas.org/posd/state-state-data-2015.
[v] U.S. Department of Agriculture. "Parents Projected to Spend $245,340 to Raise a Child Born in 2013, According to USDA Report | USDA Newsroom." Newsroom. Accessed October 18, 2016. http://www.usda.gov/wps/portal/usda/usdahome?contentid=2014/08/0179.xml.
[vi] CSG Actuarial. "Final Expense Insurance Sales Nearly $400 Million in 2013, Life Insurers Council and CSG Actuarial Report." CSG Actuarial. Last modified September 8, 2014. https://www.csgactuarial.com/2014/09/final-expense-insurance-sales-nearly-400-million-in-2013-life-insurers-council-and-csg-actuarial-report/.
[vii] College Board. "Average Published Undergraduate Charges by Sector, 2015-16." Trends in Higher Education. Last modified 2015. https://trends.collegeboard.org/college-pricing/figures-tables/average-published-undergraduate-charges-sector-2015-16.
[viii] Richards, Van. "Life Happens Life Insurance Calculator." Advice 4 Life Insurance. Last modified October 18, 2016. https://www.advice4lifeinsurance.com/
[ix] Richards, Van. "Ratings." Advice 4 Life Insurance. Last modified October 14, 2016. https://www.advice4lifeinsurance.com/ratings.html