The television commercials urging the public to buy life insurance may be self-serving and manipulative, featuring sad, middle-aged women who look pained that their dearly departed husband didn't take out life insurance. But that doesn't mean those ads aren't right.
It's easy to see why life insurance caught on. It's been around practically forever, since ancient Rome, but it really began gaining popularity during the 1800s. Back then, your life might easily be cut short because of cholera or smallpox. Or your lantern might burn down your home. There were cattle stampedes. You might be blown to bits during the Civil War.
While our life expectancy and safety issues have vastly improved, plenty of people still don't buy life insurance, according to some surveys. For instance, a recent New York Life survey of 1,000 Americans ages 37 to 48 showed that 20 percent of Generation X households don't have a life insurance policy.
Granted, you might not need life insurance. The main rule of thumb is if nobody will be financially devastated by your death, it isn't a must-have. But not everyone goes by the rule of thumb. Here are some common reasons people don't buy life insurance. If this sounds like you, you may want to reconsider.
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If I check out early, I have plenty of assets that will take care of my family. There is logic to that – if you have a million dollars squirreled away and a will, who needs life insurance? But it can still be a risk to go without. Marc Renson, a 43-year-old who owns Ambition Coffee & Eatery in Schenectady, N.Y., wishes his father had bought some.
His dad had said, "I don't need life insurance," to which his son quips: "He was right. He didn't need life insurance, but his family did."
Renson describes his father as a serial entrepreneur, often opening businesses like arcades and an auction house, then starting something else. In 1984, his dad bought a sawmill operation and a few years later, purchased a new, bigger sawmill for $600,000 as well as timbering equipment and five acres of land. It was a $1.1 million investment.
"Then he fell asleep behind the wheel of his car and was killed," says Renson, who was a few months away from graduating high school. His dad, who died in 1989, was 47.
There were a lot of assets, but Renson's father left them a startup sawmill business the family hated operating and didn't fully know how to manage. "Running chainsaws, cutting down trees, pulling them out of the woods, operating tractors, driving dump trucks – all to get these trees to the little sawmill and produce lumber that we would go and custom-make sheds for customers," Renson says.
His family had been rich, Renson says, but within a year, his mother declared bankruptcy and moved into a low-income, two-bedroom apartment. Renson's mother is 70 and doing well now, he says, but a life insurance policy would have saved her a lot of financial agony.
"I remember once instance in '91 when my mother was let go from her third job at a hotel," Renson says. "They downsized and didn't need her position. She sat crying on the sofa wondering how she was going to finish paying my $1,500 tuition."
I'm healthy. I've been wasting my money on life insurance. Aaron Endré, 27, owns a public relations and marketing firm in San Francisco. His mother, a homemaker who lived in Naples, Fla., died two years ago of colon cancer at age 52.
"She had life insurance her whole life but let it lapse, thinking that she was healthy, just before she was diagnosed with stage 3 cancer," Endré says.
Endré and his mother never discussed the fact that she let her policy lapse. Endré imagines, however, that she felt terrible about it. "I distinctly remember my mom telling me throughout my life that I would be covered in case anything should happen to her or my stepdad," he says.
[Read: How to Get Your Insurance Claim Paid.]
I realize life insurance is important. I'll get it pretty soon. That was what Grant Smith was thinking. But he didn't get it soon enough.
Smith is 36 and lives in Atlanta. He and his wife, Alison, have a 2-month-old son. And Smith is fighting extensive small cell lung cancer.
Smith first started thinking about buying life insurance when he began receiving advertisements in the mail from the Gerber Life Insurance Company. But he was busy with his business, applianceart.com, which he started about three years ago. He also got married in July 2013, and in August, he bought a house.
A few weeks later, Smith began coughing up blood at the grocery store.
On Sept. 1, a doctor told him he had cancer. "I thought he was kidding," he says.
Smith's prognosis is dire. Chemotherapy is no longer working, so Smith is now participating in clinical trials in New York City. He has been talking to an estate planner and doing what he can to fund his son's college education, including starting a campaign on a crowd sourcing site for fundraising, rockethub.com.
If things don't go well with the clinical trials and a few drug therapy options doctors have discussed, Smith says, he might only be around another three or four months.
"Like any other small business owner, the American dream was to build this company into something that I could sell someday. That was kind of the plan," Smith says. As for his wife and son's prospects, he says she has a full-time job, "and I have this company, which I don't know what to do with."
Smith adds, "It's not easy at my age that I don't have much to leave behind, and it hurts my ego. I find it emasculating to be a provider and not leave anything behind."
[Read: How to Raise Money for Medical Bills.]
Which is why he is now a fan of life insurance.
While a lot of people undoubtedly put off buying life insurance because of the cost – which can be a few hundred to a thousand dollars a year, depending on the policy and the person's age – Smith says he realizes it is a bargain compared to other family-related expenses.
"I think life insurance should be purchased for a family before birth," Smith says. "There's so much leading up to the birth, though, that you can get wrapped up in, with what kind of stroller to buy and swaddling and the nursery graphics for the wall."
But his son, Smith says, isn't going to remember what the colors of his
bedroom wall were.