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Fourth-Leg Contrarian Indicator: Life Insurance Must Make Sense, Because Fewer People Have It.
January 07, 2011 2010-12122
A contrarian is someone who believes the herd is usually wrong: the herd is usually running just behind the curve, the herd buys high and sells low, and the herd is always chasing the next big thing, but never catching it. For contrarians, their best bet is to figure out how to zig when everyone else is zagging, and vice versa. Intelligent contrarians often make very profitable financial decisions. But contrarians who make financial decisions just on the basis of being different usually end up with uneven results
If you have a contrarian perspective, some information about life insurance released in August 2010 suggests the fourth-leg retirement ideas may have a significant place in shaping the financial futures of many Americans.
On August 31, 2010, The Life Insurance Marketing and Research Association (LIMRA) released a study that showed individual ownership of life insurance had hit a 50-year low. LIMRA determined that only 44% of U.S. households had individual life insurance and 30% had no life insurance coverage at all. Quoting the report, “Today, there are 11 million fewer American households covered by life insurance compared to six years ago.”
What does life insurance ownership have to do with the fourth-leg retirement idea? One of the questions asked in the study was why Americans didn’t own life insurance. More than half of all households surveyed said they needed more life insurance – the highest level ever registered by LIMRA, which conducts the survey every six years. But 40 percent said the reason they didn’t buy life insurance was because they had other financial priorities right now. The two highest priorities named were paying down debt and saving for retirement.
Here’s the contrarian slant: These statistics indicate there is a herd of Americans that knows they are behind the curve on their retirement projections. In order to catch up, they believe they must make retirement saving a priority – even if it means going without life insurance. But if their financial situation is such that they have to sacrifice the immediate protection that life insurance provides, it means they probably are going to need a fourth-leg retirement approach in the future – and they won’t have the life insurance to help them make it work.