Study: Most Families Dangerously Low on Life Insurance

October 20, 2014

Are you and your family dangerously exposed to the risk of an untimely death? The loss of a breadwinner and even the loss of a stay-at-home spouse can create an immediate and significant hardship for those families affected. According to a recent study from the Life Insurance Research and Marketing Association (LIMRA), the majority of 'middle market' families surveyed reported that they would have to make drastic or significant financial changes if they lost an adult household member.

For the purposes of the survey, LIMRA defined the middle market as consumers ages 25-64 with annual household incomes of $35,000 to $99,999.

Among their key findings: Only 46 percent of those surveyed even owned individual life insurance. And about 25 percent responded that they own no life insurance of their own at all. If they have any dependents, and they are not independently wealthy - to the extent they can support their children to adulthood and their spouse for life off their savings and investments - their dependents are in significant financial peril.

Group Coverage

Many of those surveyed report that they own group coverage via their employers. The problem with this is that the amount of life insurance generally available through workplace plans is extremely limited. Often the most you can get through an employer plan is $50,000.

However, for most middle market workers, $50,000 barely replaces a year's worth of income - and less than that after funeral costs and related expenses. Once the year is up, and the limited insurance death benefit is spent, widows and orphans still have to get by.

Meanwhile, employer-sponsored coverage can vanish if you lose your job. If you become disabled, you could lose your job as a result of the illness or injury - and be unable to purchase life insurance on your own as a result of the disability.

7 in 10 consumers in the middle market reported that routine monthly cost-of-living expenses have been preventing them from purchasing their own individual life insurance. Half of those surveyed blame Internet, mobile phone and cable TV costs for preventing them from purchasing insurance.

How Much Coverage Do You Need? 

Most financial planners recommend that those relying on income from their jobs, who have families to support, own somewhere between eight and twelve times their annual income in life insurance. In low interest rate environments - such as we have today, or where the breadwinner is relatively young, with a lot of earning years ahead, the recommended amount can be even greater.

What to do about it?

If you are uninsured or underinsured, and you have people depending on you or a spouse for their financial well-being, call your life insurance agent. If you are in good health, many times you can purchase an inexpensive term insurance policy for a significant amount of coverage for the cost of a dinner out each month.

In most cases a nurse will come to your home or workplace to examine you. Most individuals are pleasantly surprised at how affordable and easy the process is. The most important thing is to get protection in place immediately.

Click here to return to Amity Insurance E-Newsletter October 20, 2014.