Anthony Anderson knew the importance of having life insurance long before Hollywood came calling. The star of ABC’s comedy series black-ish and 2015 national spokesperson for the nonprofit organization Life Happens’ Life Insurance Awareness campaign remembers seeing his parents have regular meetings with their insurance agent when he was young.
When his father passed away about a decade ago, Anderson helped to pay for the funeral expenses. His father’s life insurance policy also covered some funeral costs and enabled Anderson’s mother to manage ongoing household expenses. “My parents didn’t have a lot, but were able to afford a $25,000 policy,” Anderson says. “They knew it would help to cover the costs associated with a funeral and burial.” (See our story The Lowdown on Funeral Costs.)
Although Anderson’s family was prepared, many others aren’t. In fact, 54% of Americans say they’re unlikely to purchase a life insurance policy in the foreseeable future, according to a study conducted by LIMRA (formerly known as Life Insurance and Marketing Research Association) in conjunction with Life Happens. That’s why the 45-year-old Compton, Calif., native says it’s important to share with his teenage children the lessons his parents taught him about life insurance, as well as other tried and true financial advice.
Kiplinger spoke with Anderson, who also revealed the biggest money mistake he’s ever made and the best financial advice he’s been given. Here’s an edited excerpt from our interview:
Why do you think it’s important to have a life insurance policy?
No one ever thinks about death or what and who you leave behind — it’s all about the here and now. Being the sole provider for your family, if something were to happen to you, the lifestyle that your family is accustomed to living drastically changes almost immediately.
Within the last year, I’ve lost four friends, and they all had families. They were all the head of households, and none of them had life insurance. In the case of the friends that I grew up with, each time the hat was passed around the neighborhood to gather a collection for two reasons: to help bury these people and to help their families cope financially. In experiencing that, it showed me how important having life insurance is and let me know that I had done the right thing when I got my first policy at age 18.
I can honestly say that if something were to happen to me today, the lifestyle that my family is accustomed to living would not change other than not having me around. They would be provided for financially, including my children’s college educations, which was most important to me.
Are you teaching your children about why it’s important to have life insurance?
Yes. I try to emphasize that it’s best to get it at an early age when the premiums are low, you’re at the prime of your health and it’s beneficial to you. I’ve talked to them about the policies their mother and I have and why we have them. I have a standard term policy.
What advice would you give to someone who’s on the fence about getting a life insurance policy?
I would say, “You have car insurance. You have home insurance. You have your big-screen TV insured. Why not take out an insurance policy on your life?” It’s just like when you decide to buy a big-screen TV and get a warranty. If anything ever happens to the TV, you simply make a phone call, and it’ll be replaced. That’s the point I try to get across with my friends about life insurance.
The big difference is you can’t be replaced. That’s why it’s important to have the life insurance to make sure that if something were to happen, your family is able to maintain their lifestyle with little interruption.
What other types of insurance do you have?
I also have disability insurance. That’s in place just in case a freak accident were to happen and I wasn’t able to work, but am still living. I don’t have to worry about my family having to move out of our home and downsize, because we weren’t prepared.
What’s the biggest money mistake you’ve ever made?
That would be some real-estate investments that happened right when the market crashed around 2008. I was hit pretty hard. I was building a 10,000-square-foot home at the time and owned an income property. When the bottom of the housing market fell out, I was left with a little more than $5 million in losses and it was all cash — liquid money that I lost. That was the biggest and only mistake. Fortunately, because of the financial team I have in place, I was able to recover without having to file for bankruptcy.
What type of financial team do you lean on for support?
I have a financial adviser as well as an investment adviser. I have a team in place for the purpose of checks and balances (see our story How to Pick a Financial Planner). Everybody is accountable to someone else.
What’s the best money advice you’ve ever been given?
Earlier on in my career when I started making a little money, things like having various types of insurance, annuities and investing in the stock market were foreign to me. Now, these are all things that I have in place. The best money advice that I’ve been given was to invest in myself, and my parents always stressed planning for the future. It’s not about the here and now. It’s about 30 years from now — be aggressive about funding these various accounts while I’m young, so I’ll have money coming in later in life.
What money lessons are you teaching your kids?
I talk to my kids about the importance of not just having good credit, but having excellent credit — and how it affects things such as employment and secondary education. I also talk to them about the importance of having a credit profile as a teenager. For example, if you need to apply for a student loan, while you may not have an established credit history or a FICO score, you at least have a credit profile. We talk about having those things and the importance of not abusing them.
I recently had a conversation with someone about knowing when is the best time to talk to your kids about money. I said it’s when you show them a $1 bill and $100 bill and your child chooses the $100 bill. That’s when it’s time to have that conversation, because they know which is greater (see our story Smart Ways to Talk to Your Kids About Money).
What types of financial education do you seek out?
I don’t read financial publications every day, but I do try to be aware and knowledgeable as much as possible on certain aspects of the stock market and financial world. I do that so when I’m talking with my financial team they aren’t speaking a foreign language to me. Since I have limited knowledge, that’s why it was important for me to put together a team of people who are experts in the field that I can defer to.
What’s the most frugal thing you do?
I’m not out here buying the latest cars. I don’t have the biggest house on the block. I have a moderate house on the best block. I do things like that (see our slide show Frugal Habits of the Super Rich).
If you were starting out today, would you follow the same path?
I wanted to be three things growing up — a professional football player for the Dallas Cowboys, a lawyer and an actor. It was at the age of 9 that I realized if I was an actor I could become all of those things and whatever else I wanted to be in life.
So, I will say this: If I had to do it all over again and acting wasn’t happening for me, I would be a lawyer or in sales on a global scale. I have the gift of gab, and I’m very argumentative. I could see myself doing either of those things and flourishing.
How do you give back to the community?
I’m a type 2 diabetic. I often go out into the African-American community to give my testimony and talk to people about the importance of getting regular checkups and how to avoid getting diabetes. I work with and help feed the homeless, as well as battered women and children. I’m also active with the Watts Boys & Girls Club. There are a lot of things that I do that aren’t public, because I don’t need them to be. This is just what I want to do in my community and how I choose to give back.
(Source: Tribune Content Agency, LLC)