Most Households Lack Adequate Life Insurance

 

Researchers recently found that more than 20 percent of 24 million households in the United States did not have life insurance. Of the households that did have coverage, only about 50 percent had life insurance for all of the people living there. Experts said that more than 30 percent of adults do not have life insurance, and this is a statistic that has remained the same for the past two decades. Researchers also said that more than 50 percent of Generation X and Generation Y households said they needed more coverage. They said that 70 percent of women stated life insurance was a necessity, but only about 60 percent of men agreed with that. Of the married women observed, only about 30 percent owned life insurance even though 70 percent of households had two incomes. Researchers also said that about 30 percent of women earned more than their husbands.

These statistics may seem surprising, but what researchers found even more surprising were the comparative statistics they gathered regarding peoples’ feelings about life insurance. About 75 percent responded that they felt life insurance was important and was the best way to protect against the loss of income of a primary wage earner. In addition to this, life insurance ranked higher than any other income or asset Americans expected they would use to pay bills and manage other living expenses if a main wage earner died. Many Americans still believe that a surviving spouse will cover the expenses if the other dies, but they often do not realize just how financially devastating the loss of one income can be. The comparative statistics prompted researchers to find out why people were not buying life insurance if they knew it was important.

The most common reasons cited for not purchasing this coverage were that it was not affordable or there were competing financial priorities. However, researchers also found that people had misconceptions about the cost of life insurance and often overestimate the cost of it threefold. About 60 percent of the people surveyed said they had not been approached about buying life insurance within the past couple years. More than 30 percent of shoppers who met with sales representatives but decided not to buy coverage said their sales rep did not follow up. Another 10 percent said they were unsure what type to buy, and yet another 10 percent said they were afraid they would pick the wrong type. Les than 10 percent said they did not know enough about coverage to purchase it.

Researchers also looked at what prompts people to buy life insurance. About 40 percent of respondents said major life changes such as getting married, buying a home or having children prompted them to start shopping. Another 25 percent said they thought about coverage because of financial advisers. Twenty-five percent also said they purchased coverage because they wanted to review theirs and decided they needed more. Slightly more than 10 percent said friends or family members recommended them to an adviser or life insurance sales representative.

Many Americans today believe that life insurance benefits may not be as useful as stocks and other investments. However, in an ever-changing market, life insurance is still a good way to have the assurance of guaranteed benefits despite what is happening in the world. In addition to this, investments are normally taxed after a person dies, but life insurance avoids that tax. With solid financial planning, this money can also be kept out of estate proceedings.

One final point researchers made was that sales representatives needed to work harder to ensure more people are offered coverage and that follow-ups are made after initial contact. Researchers said that nearly 80 percent of people with existing relationships with sales reps bought life coverage, which was higher than the percentage of buyers with no existing relationships. They also said giving customers a needs-based analysis will help them make the best decision and understand how coverage works. Nearly 75 percent who received this type of analysis from an agent or rep bought coverage. To learn more about this topic, please call ACBI at 203-259-7580 or visit our website.

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