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Myths about life insurance policies for farmers


SUN PRAIRIE, Wis. — There are many reasons farmers don’t purchase life insurance policies although some of them may be inaccurate.

“About 40% of Americans don’t have life insurance,” said Ben Bernard, managing insurance adviser for Ascent Financial.

Bernard, who has been working with life insurance policies for the past 15 years, talked about them during a recent webinar organized by Compeer Financial. He highlighted the following seven myths about a farmer’s need for life insurance.

1. Life insurance is the same for every family. “A lot of information is targeted towards a typical family of a mom, dad, two kids with both parents working and saving for college and retirement,” Bernard said. “But most farmers are multi-generational business owners of the farm operation.”

Farming is one of the riskiest professions.

“Farming is twice as deadly as being a police officer, five times as deadly as a fireman and over 70 times riskier than being a banker,” Bernard said.

2. Life insurance is expensive. A recent study found that 25% of Americans said they need more life insurance, but only one out of 10 plans to purchase a policy in the next year.

“The main reason is cost with 63% saying it was too expensive,” Bernard said. “But 80% of Americans overestimate the cost of coverage.”

For $1 million in life insurance coverage, Bernard said, it can be as affordable as $2,200 per year up to close to $4,000 per year.

“We customize each plan to fit the needs of the client,” he said.

3. Getting life insurance is complex and time consuming. “Traditionally you’d have a 20- to 30-page application, but now the process is streamlined to help take the headache out of getting life insurance,” Bernard said. “Many companies offer an accelerated underwriting program, which allows the client to get a policy without getting a medical exam.”

Instead of an exam, Bernard said, the company may review medical records or conduct a phone interview with the client.

“There are a lot of ways to simplify the process and the time you will need to spend is less than a couple of hours,” Bernard said.

Both term and permanent life insurance policies are available.

“Term policies are the most cost-effective option, which are set up for a certain length of time and the premium will be locked in, as well as the death benefit,” Bernard said. “These policies are great for debt protection and very useful if you have a buy-sell agreement with multiple owners in the business.”

“These policies have a very valuable convertible option if you’ve had a significant change in health,” he said. “The conversion option will allow you to convert the policy from a term policy to a permanent policy with no health questions asked.”

Permanent life insurance policies lock in coverage for life, Bernard said.

“The differences are how the policies earn money and the cash value,” he said. “You can also get a hybrid policy that combines life insurance with long-term care needs so both needs are covered with one policy.”

4. If you’re young and healthy, you don’t need it. “Locking in coverage for the long term could be a requirement of a loan,” Bernard said. “When you’re young it’s a great opportunity to do pre-planning and as you get older life insurance cost will increase.”

5. I have health issues, I can’t get life insurance. “This may be true for severe health conditions, but a lot of times we’re able to find a policy for clients if they have a health condition that was traditionally a knock out question such as diabetes, high blood pressure or a history of cancer,” Bernard said. “If you are overweight or use tobacco, many times there are options.”

The health classifications for policies are preferred plus, preferred, standard plus, standard or substandard.

“When you’re having some health issues, we can look into your situation and find the right carrier that’s going to give you the best offer which will translate into the best rate,” Bernard said.

6. Only the breadwinner needs life insurance. “The cost of raising a child is almost a quarter of a million dollars and if you have two, three or four kids that can grow significantly,” Bernard said. “There’s a value to account for when covering those bases of a stay at home parent.”

7. I’m better off investing my money, rather than buying life insurance. “Life insurance is an essential component of a financial plan, so look at both because there is a value in both,” Bernard said.

“You can get $500,000 in coverage for a 30- to 40-year-old person for $400 to $500 per year and that’s less than $10,000 over 20 years,” Bernard said. “If you pass away along the way, life insurance is a nice addition to your investment.”

Living benefits can be added to term or permanent life insurance policies.

“This changes the life insurance death benefit into a pool of dollars and you can access that money if you have a chronic, critical or terminal illness,” Bernard said. “If you are unable to work, you can tap into your life insurance policy to cover medical bills or replace income, so you don’t have to pass away to see benefits.”

For more information about Compeer Financial, go to www.compeer.com.

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