A large portion of Americans have life insurance, but unfortunately they may not have as much as they need - or think. The fact is that many people who say they have life insurance do so only through group plans provided by their employers, which experts believe should be part of a larger life insurance strategy rather than the center of one. The good news is that people seem to see the value of such coverage, to the extent that it's an attractive part of any employment situation.
Indeed, while only 27 percent of American adults say they have life insurance via a small group policy, more than two-thirds also say they would obtain such coverage if their employers offered one, according to a recent Harris poll for OneAmerica. By and large, poll after poll shows that the majority of Americans see the value of life insurance as a financial protection tool, and that was reflected here as well.
In all, 60 percent of respondents who already have small group life insurance said they did so to provide financial protection for family and other loved ones, and 44 percent noted it provides them solid peace of mind, the report said. Another 40 percent said they would use those benefits to pay off their own debts and expenses to alleviate financial pressures on loved ones left behind.
What's the shortcoming
However, the issue with many of these voluntary life insurance plans provided by employers as a perk is that their death benefits are relatively small, the report said. Only 30 percent of those polled said they had more than $100,000 in life insurance coverage overall, and another 28 percent said they had between $51,000 and $100,000. That leaves 42 percent of respondents who have $50,000 or less in voluntary life insurance through an employer.
"September is Life Insurance Awareness Month, and the information gathered by The Harris Poll provides further proof of the strong desire for employed Americans to have access to long-term solutions to protect the financial future of their families," said Jim McGovern, senior vice president of employee benefits at OneAmerica. "For most employees, the workplace is the only opportunity they have to purchase life insurance."
Unfortunately, 13 percent of those polled who did not have coverage said they were concerned about other expenses that had to come first, and 11 percent thought it would be unaffordable.
The big picture
This all comes as about 59 percent of Americans own at least some kind of life insurance, but only 22 percent have both group insurance through an employer and individual coverage for themselves, according to the latest Facts About Life report from LIMRA, based on data compiled in time for September 2018's Life Insurance Awareness Month.
The good news for the industry as a whole is that Americans under the age of 45 are increasingly interested in such coverage, with the number of people in that age group who have insurance growing from 2010 to 2016, the report said. This comes as more than 1 in 3 Americans say they would feel a negative financial effect within just a month if their household's primary wage earner died. These conditions make it no surprise that more than 9 out of 10 respondents said they would use the payout from life insurance to cover final expenses, and 2 in 3 said they would use the money to replace lost wages.
In all, the number of respondents who said they see a need for life insurance totals about 50 million households, and even 1 in 5 people who already have some life insurance recognize that they don't have as much as they probably need. Moreover, about a third of respondents who had spouses or partners said they wished those people had more life insurance, and almost 1 in 6 said they didn't know how much the other had.
The biggest issue among respondents when it comes to not having enough life insurance was that they didn't know how much or what type to buy, the survey found. While about 40 percent of respondents overall said that was the case for them, the issue was alarmingly prevalent among millennials, of which nearly 60 percent said that lack of knowledge was an issue. Likewise, 43 percent of those young adults said they had never been approached by a financial professional about the issue, compared with less than 1 in 4 in the total population.
An employer's role
That lack of contact with financial professionals may be just another reason why companies would be wise to start offering their employees group life insurance options, according to Benefits Pro. Doing so not only provides a little more peace of mind for their workers - particularly their younger ones - at a relatively low cost for both employers and individuals, but may also help companies stand out as great places to work.
In a low-unemployment job market like the one seen in 2018, companies need to do more to both attract and retain top talent, so any benefits offerings that go above and beyond industry norms are likely to be well-received and valued, the report said. Beyond that, though, this may provide an important introduction to life insurance for people who have little to no experience with it, allowing them to potentially improve their own long-term financial planning and standing going forward.
Likewise, 46 percent of respondents who have employer-offered group life insurance, in a poll by the auto benefits organization AAA, say that they are concerned they would lose their coverage if they change jobs. This comes as 57 percent of people who have such coverage say that is their household's only life insurance policy. Along similar lines, just 47 percent of those polled who had life insurance coverage said that their policy carried death benefits equivalent to between one and three times their current annual salaries.
Getting it right
For all these reasons, it's wise for companies, insurers and individuals to come together and make sure more is being done to help people understand what's an appropriate amount of life insurance for every individual, according to Reflector. When people understand the true value of such coverage in their lives, they are far more likely to make good decisions about their financial futures.
That may require all involved to be a little more proactive, but when a good plan can be formulated, everyone from insurers and employers to individuals is likely to be in a better position going forward.