By Steve Rueschhoff and David Levenson
The COVID-19 experience has made it clear that life is fragile – physically, emotionally and financially. For many Americans, the pandemic has been a wake-up call, a trigger to reconsider the financial strategies they’ve created to prepare for the unexpected. Life insurance must be an essential part of these strategies.
However, people understand how important life insurance is. According to LIMRA and Life Happens, 42% of families said they would face financial hardship within six months if the family’s main earner died. For 25%, the tightening would come much faster – within a month.
Yet there is a disconnect between what Americans understand and what they have done about it. In 2021, only 52% of Americans had life insurance coverage, a significant drop from 63% in 2011. LIMRA research reveals that there are approximately 60 million uninsured and underinsured households in this country. country, with an average coverage gap of $ 200,000. This gap reveals the difference between the amount of insurance that households actually have and what they need.
For women, the picture is particularly disturbing. According to the 2021 Insurance Barometer study, only 46% of women have life insurance compared to 58% of men. The same study found that the percentage of women with life insurance has declined for five consecutive years.
Here again, the pandemic played a role. Women were hit hard by COVID-19 as they were forced to juggle their responsibilities at work and at home, especially when it came to caring for children who could not go to school. school or daycare. The result: many job losses and reduced insurance coverage. Industry figures show more than 18 million women lost their life insurance coverage in 2020, with more than a third saying it was due to unplanned job loss.
When asked, people offer various reasons for not being insured. Upon examination, many of the reasons are based on myths. some think life insurance is too expensive. In fact, half of Americans overestimate the cost by three. The truth is that many insurance products, like term life insurance, are quite affordable. Plus, life insurance costs increase with age, so generally speaking, the earlier you buy the better.
Others believe that the life insurance they purchased from their employer is adequate. This may be the case, but there are two caveats to consider: first, coverage by such plans may be insufficient for the need and second, policies are not necessarily transferable. If you quit or lose your job, you could lose your coverage.
Financial advisers can help their clients separate insurance fact from fiction. They can also help simplify this process which some people find confusing and overwhelming. A financial advisor can match a client with the right policy and the right amount of coverage.
Polls show COVID-19 has increased awareness of the importance of life insurance. In fact, a third of Americans said the pandemic was the main reason they started buying life insurance. Now is a good time to turn those intentions into actions. If COVID-19 has taught us anything, it’s that the future is unpredictable and sometimes frightening. Being prepared for what can happen is the right way to protect those who matter most to us.
Steve Rueschhoff is Director, Managed Investments and Insurance at Edward Jones. Steve can be contacted at [email protected]
David Levenson is President and CEO of LIMRA, LOMA and LL Global. David can be contacted at [email protected]
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