There’s a reason people love to shop at places including Costco and Wal-Mart. There’s the usual reasons that people like to get good deals, but more importantly if you are a smart money moves shopper buying in bulk can often get you the best deal on what you buy if you really need the item. For certain, one of the biggest item bought in bulk is bottled water, but hardly ever do people think about buying their life insurance in bulk. Why is that?
The last five to six years, I’ve been amazed about how much people talk about the concept of refinancing their homes. If you do the math, if someone lives in a home long enough a refinance can absolutely make sense for their situation. If you have a $300,000 mortgage and go from a 4.5% interest rate down to a 4% interest rate, it can mean tens of thousands of dollars of saved interest over the life of the mortgage.
It’s interesting to me that most people don’t think about how they manage their life insurance like they do their mortgages. You wouldn’t take out a $50,000 mortgage at one lender, a $100,000 mortgage at another lender, and then a $150,000 mortgage at a third lender would you? No, in fact, people years ago who tried to do these suspicious 80/20 mortgages got crushed in the downturn of the market. Remember, it always pays to buy things in bulk if you need the items.
The sad truth is that life insurance is always an afterthought for families as they plan their finances. They purchase life insurance in a very haphazard manner by picking up a few hundred thousand of insurance at work and perhaps a term insurance policy or a whole life insurance policy along the way because a life insurance sales person convinced them to buy the policy. What’s interesting is the value of the life insurance you bought 10 or 20 years ago isn’t worth the same today simply due to inflation increasing every year. Might you want to consider doing a refinance of your life insurance?
The concept here is that if you own a $500,000 term insurance policy, a $750,000 term insurance policy, and then some group insurance policy at work, would you be better off buying in bulk and doing one massive life insurance policy over the next 10, 20, or 30 years? Or, if your cash flow was excellent, would you be better off having a long term cash value driven insurance policy that will be there forever?
Unfortunately, most people who buy life insurance can’t see beyond their belly button. What that means is that they only look at the cost today and don’t do a good job comparing the costs over the next 20 or 30 years. What you might find out just like a mortgage is that it could cost you something to refinance your life insurance today, but it will save you thousands in the long term.
Isn’t it time you refinance your life insurance?
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Ted Jenkin is a frequent guest columnist for the Wall Street Journal and Headline News Weekend Express. He is the co-CEO of oXYGen Financial. You can follow him on LinkedIn @ www.linkedin.com/in/theceoadvisor or on Twitter @tedjenkin.