Money Slackers: Why we got life insurance



Myles Ma

Myles Ma

Senior Reporter

Myles Ma is a senior reporter at Policygenius, where he covers personal finance and insurance and writes the Easy Money newsletter. His expertise has been featured in The Washington Post, PBS, CNBC, CBS News, USA Today, HuffPost, Salon, Inc. Magazine, MarketWatch, and elsewhere.

Published September 24, 2019 | 7 min read

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Welcome to Money Slackers, a regular discussion among Policygenius staffers about money. We held the following conversation in a Slack chatroom. It's been lightly edited.

Myles Ma : As we all know, it is life insurance awareness month. (Hold for applause.) So it's finally time for us, life insurance experts, to talk about the thing we do at work. For people who do have insurance, are you happy with your purchase?

Logan Sachon : I love my life insurance. It makes me happy every time the premium gets taken out of my account.

Patrick Hanzel: : It makes me feel good that I can leave a legacy to my family in the event something happens to me. I don't have any dependents yet. But then my parents could fully retire, siblings pay off some debt, and nieces and nephews maybe go to college on my dime.

Logan: I also feel that way, Pat.

Blayne Smith : It's not something I actively think about now that it's done, but knowing I have it is a nice feeling.

Logan: I feel like, ‘OK even if I die, then my loved ones get some money’.

Anna Swartz : I will get life insurance if we have a baby ever. Should I get it for my dog?

Logan: So Anna, if you’re planning on having children, you should probably just apply now! Your rates are as low as they’ll ever be.

Anna: Wow, Logan thank you! What if I decide to get in better shape? Should I wait until I can run a marathon?

Patrick: You'll still be getting older.

Anna: Noooooo.

Logan: No, life insurance companies don’t care about exercise.

Myles: What is the point of exercise then?

Anna: Outrun death, Myles. You can do it.

Myles: I know it's something people procrastinate on. What pushed you over that hump to buy it?

Logan: I found that I was nervous whenever I went to the doctor that they’d find something that would mean I couldn't get life insurance in the future and then I'd be so mad at myself. So I just applied and bought some. It was so easy!

Anna: Did you do it through Policygenius, Logan?

Logan: I did! David on the sales team helped me with my application. I had a few little things in my health history that meant I couldn’t get the best rates, but he helped me choose an insurance company that offered me the lowest price.

Compare life insurance quotes from more than a dozen insurers.

Patrick: Even things that most people don't think about can affect life insurance, like speeding tickets.

Myles: What do you mean, Pat?

Patrick: Driving history can raise your rates.

Myles: Are there any other lesser known things that can raise your rates?

Patrick: Unfortunately, there are other things you have zero control over, like family history. So as your family gets older, they are likely to get diagnosed with more stuff, etc.

Logan: Blayne, how was the process vs. what you were expecting?

Blayne: Pretty much what I expected. I chased everything myself really. (I did not get life insurance through Policygenius.)

Logan: Yeah, that was one thing I was grateful for when I applied through Policygenius, is that they did the chasing for me. I think if I’d had to follow up with my doctors myself, it never would have gotten done.

Myles: What sort of chasing do you mean?

Logan: Sometimes during underwriting, which is when the insurance company looks at your application and assess your risk, they want more information about your health history and particular diagnoses, and so they’ll ask your doctors for statements.

Myles: I feel like in this biz you hear the 'insurance is a scam' thing sometimes. How do you respond to that now that you work here?

Anna: I think it's the idea of getting money. It seems so suspect. Why would a company ever just GIVE ME MONEY?? For dying??

Patrick: It's a big game of numbers.

Kieran Duffy : A line of thinking behind insurance is that less than 1% of term policies actually pay out. So you're likely not to die while the policy is active. But based on the cost and risk, it is a much safer bet to pay the premiums rather than take the chance you're not going to die.

Myles: So how do you convince yourself it's worthwhile if it doesn't pay out?

Kieran: You don't want your family being the people with a GoFundMe to pay for your funeral or debts.

Holden Lee : The value isn't just the financial payout, though. It's the peace of mind. And the fact that the payout is the coverage amount from day one, not when you've, say, saved up that $1 million.

Patrick: A lot of people are upset when they realize they don't get any money back if they outlive their term of coverage, but that's the same with any insurance. I don't get my car insurance premiums back if I don't get in a crash. I'm paying for the coverage in the event something DOES happen.

Kieran: We frequently have conversations where people are looking to get their money back for their life insurance. There are products that do just that, but they are 3.5 times more expensive than a regular term policy and are not adjusted for inflation. So the idea of receiving your money back is false since you are actually losing money over time.

Logan: I think of it not as a “less than 1%” chance but as a “non-zero” chance — psychologically, that feels different to me. Like, it probably won’t happen, but it could happen!

Holden: The math behind insurance is compelling, and most people in finance and so forth do appreciate "hedging," which is insurance. The premium is simply the cost of protection. I think that's what people misunderstand. You're not paying for a payout. You're paying for protection.

Anna: Logan, do you feel like you're paying for the peace of mind?

Logan: I’m paying for my boyfriend to get a bunch of money if I die, and the peace of mind is a bonus. I do think that if I was dying I’d be like, ‘well, at least he will be OK’.

Myles: Pat and Kieran, are there any other common misconceptions you encounter when talking to customers?

Patrick: The return of premium is a big one. People really want their money back, but paying additional premiums for that benefit is still in the insurance company's favor. They get an interest-free loan over the course of all those years. As a policyholder, you are likely better off investing those additional dollars on your own. Everyone wants permanent coverage, but nobody wants to pay for it.

Kieran: A lot of our clients are looking for the "best" life insurance company out there. It's not as simple as that because every company has their own guidelines and rules as to how they view various conditions. So the question should be, "What company is best for me?" rather than "What company is best?"

Patrick: Another one is people thinking they don't need any coverage if they don't have dependents, but I think of a scenario where I'm in an accident and I rack up crazy medical bills before passing. I don't want that debt to be a burden on anyone.

Myles: Why should I, Myles, buy a policy outside of what work offers as part of my benefits?

Blayne: Do you want or need anyone to get more money if you die?

Myles: My wife and our future babe.

Kieran: Myles, you could get fired any day. Then what happens to your coverage?

Myles: Kieran, what DOES happen to my coverage?

Holden: I think similar to COBRA, you can continue coverage after leaving the company.

Kieran: Holden, that is true, but that expires after a certain period of time and is not cost-effective.

Myles: Wait, I don't know about this. Say more.

Kieran: You are able to opt into continuing coverage should you lose your job but it is not priced competitively and there are limits as to how long it lasts. It's best to secure coverage using term life insurance as you're locking in the price, coverage, and the peace of mind.

Myles: Alright, fine I'll do it. ANYWAY, WE'RE OUT OF TIME. Happy life insurance awareness month!!!

Image: Phillip Blackowl