Even when offered life insurance, many employees don’t take advantage

Data over the last year-plus has repeatedly shown that the life insurance sector is getting back on track after some difficult years in the wake of the recession. However, many industry experts also say that the recovery could be a little more robust than it has been, especially if consumers had a better understanding of how life insurance works and, more specifically, how much it actually costs. This may be especially true for people who are offered life coverage through their employers.

Anecdotal evidence suggests that while many Americans have life insurance, there are often relatively few reasons why the 100 million who go without do so despite often recognizing the benefits such coverage can provide, according to a report from Employee Benefit News. Further, while many employers across the country offer this kind of coverage at a relatively discounted rate in comparison with what people might pay for individual life insurance, few employees buy it.

Many can benefit from life insurance, but may not know it.

What's the reason?
The biggest factor in group life insurance being eschewed by consumers in much the same way individual coverage is likely stems from the same place: its expected cost, the report said. Recent polls have found that the vast majority of consumers tend to overestimate the price of coverage – in many cases, by a huge percentage – and therefore think it's not something that can be squeezed into their monthly or annual budgets. Further, because they assume life insurance is more expensive than it actually is, they likely don't seek out the advice of financial experts who could correct their misconceptions.

But when it comes to the employer-level offerings, this issue is something that companies themselves may be able to control, the report said. Having HR staff or other supervisors explain the benefits and costs of life insurance coverage may help people understand what this kind of policy can do for their long-term financial security.

Why is this important?
In much the same way that many peripheral benefits offerings from companies (above and beyond things like health insurance and retirement savings plans) often prove popular, a clearer picture of the positives associated with group life insurance could generate a lot of interest, the report said. When employers offer wellness programs that incentivize healthy activity, at least some segment of the employee pool tends to get actively involved. It's fair to guess that this might likewise happen when it comes to life insurance offerings.

Because polls show that consumers understand why life insurance is important, the ability of life insurers, financial experts, and others to communicate what it actually costs becomes crucial to growth in the industry going forward. The fact is millions of people can benefit from buying such coverage – especially those who are married or have children. The good news is that both Generation X and millennials are now starting to come around on the idea of buying coverage as they get older, but more can be done to speed up the process.