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Comparing Life Insurance Costs to a Daily Cup of Coffee

AIPMA is feeling a bit verklempt to start off April. We want you to talk amongst yourselves. Here’s a topic. “Is the cost of life insurance cheaper than a daily cup of coffee?”

Sure, we are making an April Fools’ joke about the Linda Richman character from Coffee Talk on Saturday Night Live, but the misconception is still out there today – that most life insurance products cost much more than a cup of coffee.

How much more? According to a recent LIMRA study, 50% of consumers think life insurance is three times more expensive than it actually is – and millennials overestimate the price by as much as five times! LIMRA also states just under 1 in 5 shoppers decided they could not afford the cost of coverage.

Since most insurance is bought between ages 35-44, that leaves 57 million people in the 35-44 age group who have NOT decided they cannot afford life insurance, and likely would buy if they knew the cost was less than a cup of coffee.

Now that you have those numbers, let us get back to the conversation of a cup of coffee compared to the life insurance premium costs. Just like grabbing a coffee, the monthly premium of a life insurance policy depends on multiple factors. Is it a generic gas station 16-ounce cup, or more like a specific espresso or latte? Maybe more caffeine is needed today with a 32-ounce cup? What about the different flavors to fit the needs at that time?

Buying life insurance also has similar factors when protecting a client’s family today, tomorrow, and for the future. Being a single millennial in good health usually translates into lower life insurance premium costs than someone who is older with poor lifestyle habits. Think of buying life insurance as starting with a black cup of coffee, and then having options of adding in a couple packets of sugar or some flavored creamer (or both) to fit his/her tastes.

Here’s a list of some of the “sugar and creamer” that could increase or decrease life insurance monthly premium costs:

  • Death Benefit Amount: The more coverage purchased, the higher the premium. For example, a $250,000 death benefit would cost less than a $1 million death benefit.
  • Life Insurance Policy Type: Your client needs to understand what they are buying. Term life insurance is temporary for a shorter period, while permanent (whole life) can last a client’s entire life if premiums are paid on time. A longer life insurance term vs. a shorter term could have more expensive premiums because it lasts longer.
  • Riders: More life insurance policies provide the option of adding in riders to cover potential long-term care expenses, convert a term life policy to a permanent/whole life policy, accelerated death benefit, or other qualifying living and death benefits. These riders have an additional cost.
  • Gender and Age: Females, on average, typically live up to six years longer than males, which usually means a lower monthly premium for women. Taking that factor into consideration, younger life insurance applicants will pay less than older ones due to a longer life expectancy.
  • Health: Most applicants must complete a medical exam when applying for life insurance, depending on the carrier and product. Non-medical underwriting does exist for some carriers. Typically, healthier applicants will pay less, whereas certain health conditions (recent heart attack, cancer, etc.) could cause a higher payment or even the carrier to decline coverage. A higher life insurance premium also could occur based on tobacco and/or marijuana usage.

Based on each carrier’s underwriting guidelines, other factors could come into play, including family history, occupation, and lifestyle choices.

Your clients need to keep everything in mind when selecting their life insurance policy. Sometimes, they will find that policy cheaper than a daily cup of coffee, but if they want a larger size or more benefits like riders, then the premium cost could increase as they add more of those “creams, sugars and flavors” into the policy.

Comparing Term Life Insurance to a Cup, or Cups, of Coffee

In summary, the average purchased cup of coffee costs $2.70. This price can be higher or lower based on multiple factors. For this example, we’ll stick with the average cost.

  • One cup a day = $985 per year
  • Two cups a day = $1,970 per year

At age 45, how much is the cost of $100,000 of 20-year term life insurance?

  • As low as $0.53 a day ($2.17 a day less than one purchased cup of coffee)

At age 45, how much is the cost of $250,000 of 20-year term life insurance?

  • As low as $0.87 a day ($3.66 a day less than two purchased cups a day of coffee)

Since most term life insurance is paid monthly, let’s take those numbers and compare them directly as a monthly expense.

  • $81 = One cup of coffee for 30 days at $2.70 (average cost)
  • $16 = $100,000 of term life insurance – $65 a month less than one cup of coffee per day
  • $27 = $250,000 of term life insurance – $54 a month less than one cup of coffee per day

So next time you have the life insurance conversation with a prospect or client, why don’t you have a chat over a cup of coffee to make the discussion much easier to understand? You can even share a cup virtually these days. If you would like some marketing materials to promote this concept, please contact AIPMA’s Business Development team at (800) 783-5206 Press #2 or email marketing@aipma.com.

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About Us

For more than 35 years, AIP Marketing Alliance (AIPMA) serves as a premier life insurance and annuity distribution partner to provide full-service support to independent wholesalers, brokerages and agents from our Troy, Michigan office. Copyright 2021