10 Things You Absolutely Need To Know About Life Insurance
Great post from Forbes.com by Tim Maurer giving some clarity on life insurance.
Life insurance is one of the pillars of personal finance, deserving of consideration by every household. I’d even go so far as to say it’s vital for most. Yet, despite its nearly universal applicability, there remains a great deal of confusion, and even skepticism, regarding life insurance.
Perhaps this is due to life insurance’s complexity, the posture of those who sell it or merely our preference for avoiding the topic of our own demise. But armed with the proper information, you can simplify the decision-making process and arrive at the right choice for you and your family.
To help, here are 10 things you absolutely need to know about life insurance:
- If anyone relies on you financially, you need life insurance. It’s virtually obligatory if you are a spouse or the parent of dependent children. But you may also require life insurance if you are someone’s ex-spouse, life partner, a child of dependent parents, the sibling of a dependent adult, an employee, an employer or a business partner. If you are stably retired or financially independent, and no one would suffer financially if you were to be no more, then you don’t need life insurance. You may, however, consider using life insurance as a strategic financial tool.
- Life insurance does not simply apply a monetary value to someone’s life. Instead, it helps compensate for the inevitable financial consequences that accompany the loss of life. Strategically, it helps those left behind cover the costs of final expenses, outstanding debts and mortgages, planned educational expenses and lost income. But most importantly, in the aftermath of an unexpected death, life insurance can lessen financial burdens at a time when surviving family members are dealing with the loss of a loved one. In addition, life insurance can provide valuable peace of mind for the policy holder. That is why life insurance is vital for the bread winner of a single-income household, but still important for a stay-at-home spouse.
- Life insurance is a contract (called a policy). A policy is a contract between a life insurance company and someone (or occasionally something, like a trust) who has a financial interest in the life and livelihood of someone else. The insurance company pools the premiums of policyholders and pays out claims—called a death benefit—in the event of a death. The difference between the premiums taken in and the claims paid out is the insurance company’s profit.
- There are four primary players, or roles, in a life insurance policy.These roles belong to the insurer, the owner, the insured and the beneficiary. The insurer is the insurance company, responsible for paying out claims in the case of a death. The owner of the policy is responsible for premium payments to the insurance company. The insured is the person upon whose life the policy is based. The beneficiary is the person, trust or other entity due to receive the life insurance claim—or death benefit—in the case of the insured’s passing. For example, I am both the owner and the insured for two life insurance policies (with two different insurers, as it happens). My wife is the beneficiary of each. We walk through the numbers together at least annually (and after major arguments, to prove that I’m still worth more alive!).
- Life insurance is a risk management tool, not an investment.While some life insurance policies have an investment feature that can offer a degree of tax privilege, insurance is rarely an optimal investment. There’s usually a better, more efficient tool for the financial task you’re trying to accomplish. If you haven’t yet filled up your emergency cash reserves, paid off all non-mortgage debt, maxed out your 401(k) or Roth IRA, contributed to an education savings plan (where appropriate) and set money aside for large purchases you expect in the next decade, then you likely need not concern yourself with types of life insurance that contain an investment component. (You’ll see why in #7.)
- There are two broad varieties of life insurance about which you should become aware—term and permanent. Term life is the simplest, the least expensive and the most widely applicable. With term life, a life insurance company bases the policy premium on the probability that the insured will die within a stated term—typically 10, 20 or 30 years. The premiums are guaranteed for the length of the term, after which the policy becomes cost-prohibitive to maintain or you decide to let it lapse. Yes, this means that you may very well pay premiums for decades and “get nothing out of it.” But that’s good news, because it means you’re winning at the game of life.
Permanent life insurance includes this same probability-of-death calculus, but also includes a savings mechanism. This mechanism, which is often referred to as “cash value,” is designed to help the policy exist into perpetuity. Whole life—the original—has an investment component much like bonds or CDs (but backed by the insurance company). Variable life offers investment options more like mutual funds. Universal life was designed as a less expensive permanent life insurance alternative with added flexibility, but increased interest rate risk for the owner. Although they tend to be more complex and expensive, there are financial dilemmas—often related to business planning and/or high-net-worth estate planning—for which permanent life insurance may be the only solution. There are a few select instances where permanent policies are engineered to maximize the tax-privileged growth of cash value. They are, however, only appropriate for a small number of people and still dependent on numerous other factors to work the way they’re intended.
- Life insurance can be extremely expensive, but it can also be surprisingly inexpensive. If you apply for a bells-and whistles permanent policy, the size of the premiums alone might cause you to need a life insurance benefit right then and there. But most people are pleasantly surprised when they see the relatively low premiums of a plain-vanilla term policy. A healthy, non-smoking, 30-something male, for example, might pay less than $500 per year for a 20-year term policy with a million dollar death benefit. That same individual might be required to pay 10—or even 20—times as much for a variable or whole life insurance policy with a matching death benefit. No, a term/perm comparison is not apples-to-apples. I would hazard to guess, however, that a recent widower cares little for bells-and-whistles but a great deal for the death benefit. Of course, a smoker will likely pay twice as much for any of the above. Someone with health problems could pay triple or more (or simply be declined for coverage).
- Determining the optimal life insurance policy for you doesn’t have to be complicated. While we could get really granular with a detailed life insurance needs analysis, it’s more important to get set up with something you can comprehend than it is to push off an important decision due to life insurance’s intimidating complexity. In the vast majority of situations, a household would be well cared for simply by buying enough life insurance to replicate all or most of the insured’s income for a term as long as the household expects to need that income.
Therefore, consider this simple but effective strategy for determining how much life insurance your household needs. Multiply a wage earner’s income by 15 and purchase a policy with an equivalent death benefit for a term that extends until the person insured would presumably retire. Why 15? Because it works. But it works because it results in a number that should re-create 75% of a wage earner’s income if the death benefit was conservatively invested to earn 5% (hopefully plus a bit more for inflation) annually. Here’s an example:
- Dave makes $100,000.
- $100,000 x 15 = $1,500,000 of death benefit
- $1,500,000 earning 5% annually produces $75,000 of income.
- Consider using a live person to help in your death planning. There are many online tools that can help give you an idea of how much money you should pay for the policy you need. But once you get to that point, I would recommend contacting a real, live insurance agent who can walk you through the application and underwriting process. The premiums at a given insurance company are identical whether you apply online, via a toll-free number or with a person. Indeed, a knowledgeable and dedicated insurance broker or agent may help you save money by choosing the best carrier for your particular situation. Underwriting, by the way, is the necessarily tedious process through which the insurance company classifies how much of a risk you are, based on your current health, past health, the health of your parents and siblings and enough other questions to make anyone blush. Answer truthfully—but succinctly.
- Know your options when canceling an existing life insurance policy so you don’t leave money, or coverage, on the table. If you have a policy that isn’t appropriate for you—or you simply no longer need it—it’s important to proceed carefully. First, if you realize that you have overpaid for a policy that doesn’t meet your needs, but you still need life insurance, don’t cancel the wrong policy until the right policy is in place. Who knows, you could learn of a health complication that is going to lead to you being declined for the new policy. Then you’d be left without any coverage. If you have an existing term policy you no longer need, you can simply cease premium payments and it will go away. If you have an unnecessary permanent policy with a cash value, however, you should analyze its present and expected future investment value, as well as any prospective tax complications, before cashing it in. You can do so by requesting an “in-force illustration” and a “cost basis report” from your agent.
I suspect we don’t love talking about life insurance because we don’t like talking about death. No shocker there. But open and honest discussions about planning for an unexpected death can be surprisingly life-giving. And even if you don’t buy that, the chances are good that purchasing life insurance is still an important part of your long-term and comprehensive financial plan.
Read the original article from Forbes.com Here.
Source:
Maurer, T. (2016, January 5). 10 things you absolutely need to know about life insurance [Web log post]. Retrieved from https://www.forbes.com/sites/timmaurer/2016/01/05/10-things-you-absolutely-need-to-know-about-life-insurance/#2fb2453c3872
Why it's critical to monitor life insurance policy performance
Originally posted on April 11, 2014 by Henry Montag, E. Randolph Whitelaw on www.lifehealthpro.com
Have you ever discovered a bank entry error in your checking account register, resulting in $100 or $1,000 less than what it should be? Imagine how much worse it would be if your client’s $1,000,000 life insurance policy’s death benefit was suddenly unavailable to a spouse or child due to a technicality. Unfortunately, as a result of sustained low interest rates over the last twenty years, as well as policy owner and trustee inattention to performance monitoring, approximately 35 percent of existing non-guaranteed life insurance contracts are expected to expire prior to an insured’s normal life expectancy.
Very few lay people and professionals are aware that their life insurance contracts can expire prior to their lifetime. Clients and trustees often incorrectly assume that either the agent or the insurance company is monitoring their contracts to make sure they will always remain in force, but that’s not true. As a matter of fact, it would be in the insurance company’s best financial interest if, after all those years of paying the premium, it became exorbitantly expensive to maintain the contract and the death benefit had to be reduced or the policy surrendered. According to Donald Walters, General Counsel for the Insurance Marketplace Standards Association, (IMSA), “While insurers have not publicized the issue, there is a growing concern in the industry about lapsing universal life policies.” Carriers and agents have no obligation to monitor policy performance relative to original performance expectations. Carriers are merely required to send a scheduled premium billing and an annual policy value statement. It is solely the responsibility of the policy owner to review the policy value statement and determine the needed premium adjustment to achieve originally illustrated policy values.
In August 2012, the Office of the Comptroller of the Currency (OCC) issued revised guidelines, which directs financial institutions serving as trustee of an insurance trust to treat life insurance as they would any other asset. This means life insurance, just like stocks, bonds and real estate, needs to be actively managed. Providing a policy performance evaluation and then monitoring it every 1-3 years, depending upon product type, is the only way to determine whether a life insurance contract issued in the 1980s is in danger of expiring prematurely. These universal life or variable universal life insurance contracts, unlike their more expensive whole life counterparts that have lifetime guarantees, are not guaranteed for a lifetime. This is because their performance was tied to an anticipated annual interest crediting rate, or an anticipated stock index performance, neither of which was guaranteed, and neither of which were achieved.
In the mid-1980s, when prevailing interest rates were as high as 18 percent and life insurance companies were crediting guaranteed policies much lower rates, thousands of astute policyholders switched the accumulated cash value in their whole life contracts into higher yielding bank deposit instruments.
In order to stop these outflows, the life insurance industry created a new product called universal life insurance.” These policies paid an interest rate based on prevailing market interest rates instead of a fixed rate, as had been the case in their traditional whole life contracts. If interest rates increased, then the scheduled premium could be decreased or remain unchanged for policy coverage to remain in force. What was not clearly understood, however, was that, if interest rates decreased, then the length of time the coverage would remain in force would consequently be reduced, or a greater annual premium deposit would be required in order to prevent an early expiration of coverage.
When universal life was first offered, agents and brokers would ask their clients how long they wished the coverage to remain in force. Clients would typically respond that they wanted the coverage to last until age 90–95. Next an interest rate assumption was made for the time period between the insured’s current age and this age 90–95 target in order to generate a computer illustration calculating the anticipated annual premium needed to keep the policy in force. However, this scheduled premium amount was not guaranteed.
While the introduction of this interest-sensitive product solved the outflow problem for the insurance industry, it has created other problems for policy owners in the last ten years due to policy owner misunderstandings and inattention. Few policy owners or “amateur” trustees understood that they carried performance risk. Moreover, they did not know which risks to monitor or have the tools to do so. As interest rates declined, they simply paid the scheduled premium, unaware that the policy would lapse much earlier than insured age 90-95 unless the scheduled premium amount was increased. This fact has created a crisis of lapsing policies that requires corrective action.
To avoid lapse risk, a policy performance evaluation of a universal life, variable universal life or indexed universal life contract should be independently conducted to determine, at a minimum, (1) the probability the current premium will sustain the policy to the insured’s life expectancy, (2) the insured’s age at policy lapse, (3) the competitiveness of the policy charge, and (4) the needed correcting premium to sustain the policy to the insured’s life expectancy. Inforce carrier illustrations disclaim predictive value. Hence, an actuarially certified evaluation should be obtained. Also, for older insureds, a life expectancy report should be considered so that the premium payment period is based upon the insured’s medical history and current medical condition.
The more advance notice an insured or trustee has about a potential premium shortfall, the less additional monies are needed to adjust the coverage back to its originally projected level. Since cost of insurance charges increase annually, annual performance monitoring and periodic premium adjustment avoids a lapse notice ‘surprise’ that requires a significantly higher premium to maintain the policy inforce.
Whether there was transparency and full disclosure in the initial marketing and ongoing annual policy statements for these products can be debated but performance risk rests with the policy owner. The combination of low interest rates and the fact that the octogenarian demographic is the fastest growing segment of the population has created a ticking time bomb for lapse. Corrective action is needed, and it can only be taken by the policy owner.
If the policy is owned in an irrevocable life insurance trust (ILIT), the trustee has the sole duty and responsibility to manage the trust asset. Inattention poses reputation and litigation risk for corporate trustees, and reputation risk for legal and tax advisors to amateur trustees, especially family members serving as an accommodation and relying solely upon these advisors for all trust administration functions. It is estimated that 90 percent of inforce Trust-Owned Life Insurance (TOLI) policies are administered by unskilled amateur trustees, meaning that credible professional assistance is needed to create a prudent and reasoned process that maximizes the probability of a favorable outcome to the trust estate.
In regard to corporate trustee duties, the OCC offers excellent prudent process guidance. For example, policy performance evaluation should examine the financial health of the issuing insurance company, and consider whether the policy is performing as illustrated. If the policy is underperforming, or if the policy can be improved upon, the fiduciary should consider replacement or remediation. If a trustee lacks the expertise to evaluate the premium adequacy risk or the contract’s appropriateness to fulfill the beneficiary’s objectives, the trustee has a duty to delegate and engage the necessary experts to make these determinations and assist in the suggested remediation steps.
In addition to regularly evaluating and monitoring a life insurance contract, individual policyholders should also consider the availability of newer products that were not available when the contracts were initially purchased. For example, a chronic care rider, which first became available at the end of 2011, allows an individual to withdraw up to $116,000 tax free in 2013 (adjusted annually for inflation), from the death benefit of a life insurance contract to pay for qualifying long-term care expenses. There is no reason not to have this benefit available in any life insurance contract.
Finally, the need for inforce TOLI policy attention usually triggers uncertainties as to how to get started in implementing a prudent process. Establishment of an Investment Policy Statement (IPS) is just as important for life insurance as it is for fixed income and equity investments. An IPS should:
- Update death benefit requirements
- Summarize ILIT parties and their responsibilities
- Identify trustee risk management criteria
- Identify policy and product evaluation duties and how they will be provided
- Affirm beneficiary communication requirements
An Investment Policy Statement and credible inforce policy evaluation can help ensure the longer-term planning objectives of a policy owner as well as provide safeguards for the trustee. The tools for prudent and reasoned life insurance policy performance monitoring are readily available — they just need to be used.
Gen Xers post biggest gap in life insurance coverage
Originally posted September 23, 2013 by Margarida Correia on https://ebn.benefitnews.com
What people say doesn’t always align with what they do. Such is the case with life insurance, a study commissioned by New York Life finds.
According to the study, most Americans don’t buy enough life insurance to secure the level of protection they say they would want for their families if they were to die. The average American registered an insurance shortfall of $320,000.
Generation Xers posted the biggest gap of any age group. Although average Gen Xers said they would want their life insurance policies to cover $708,996, they purchased only $260,000 in coverage, creating a coverage gap to $448,996. Millennials and baby boomers, in contrast, had gaps of $370,744 and $267,016, respectively.
The gap has widened substantially for Gen Xers since the financial crisis. From 2008 to 2013, the amount of life insurance coverage they have in place fell 35% to $260,000 from $400,000. The gap impacts more than half (56%) of Gen Xers, according to the study.
“Gen Xers have been severely impacted by the economic downturn and the gap is a clear indication of what is at risk. Gen Xers, who may be focused on financial obligations that have to do with their children, their home, planning for retirement and maybe even taking care of their elderly parents, are lacking a foundation of financial protection that life insurance provides,” says Chris Blunt, president of the Insurance Group at New York Life.
The study is based on two separate surveys, both of which polled 1,000 Americans age 25 and over with dependents and annual household incomes of at least $50,000. One survey was conducted online by The Futures Company from April 24 – May 1, 2013. The other was conducted by Greenwald & Associates via telephone in May 2008.
What really scares us these days
Originally posted October 24, 2013 by Corey Dahl on https://www.lifehealthpro.com
When I was in sixth grade, I went to my first commercial (as in, non-neighbor’s-darkened-basement-strewn-in-cotton-cobwebs-and-paper-bats) haunted house.
It was the ‘90s, the heyday of those cheap, ill-produced FrightFezts and ScReAm ZoNes that sprouted in derelict shopping centers every fall, and you weren’t cool — by middle school standards, anyway — if you didn’t go to at least one. So my friends and I skipped trick-or-treating that year, stood in an hour-long line and paid $10 of our parents’ money to see what all the hype was about.
When we emerged about 15 minutes later, I wished I’d gone trick-or-treating instead. My friends were pumped — screaming and giggling — and, wanting to fit in, I played along. But really, the entire thing had bored me. I mean, toy chain saws? Fog machines? Cheap makeup? Yawn.
Maybe I was just a really jaded 11 year old, or maybe it was just a really crappy haunted house — this was before they became the multi-story productions they are today, after all — but there was nothing in that Hobby Lobby-cum-House of Horrors that scared me in the slightest.
And, while I haven't been to a haunted house since, I don’t think it would be much different for me these days, either. I spend the entirety of slasher movies critiquing plot holes and poor acting. I’m not really into the whole zombie trend. When the electricity goes out, I worry about my frozen foods melting, not a potential ghost attack.
Increasingly, it seems I’m not alone. I read an article last week about the scaring difficulties haunted houses have been facing lately. Despite spending thousands on machines, effects, masks and professional actors, the houses’ operators are watching a lot of their guests walk away unperturbed.
The haunted house operators blamed technology. Better movie and video game special effects have upped the ante considerably, they said. And yeah, okay. Maybe. But as a longtime non-scared, I think the better culprit might be real life.
Because, the more I look back on it, the more I’m convinced that my blasé attitude toward that strip-mall haunted house (and all cheap frights) was entirely due to the fact that I’d seen a lot of things scarier than pimply, dressed-up teenagers jumping out from behind cardboard trees.
By the time I was 11, one of my grandmas had died. The other was in failing health, requiring my mom to juggle nursing home bills and the care of a senior and three daughters.
Our house had been robbed a few years earlier, and they’d run off with my life savings ... which was $20 in an old Folgers coffee can.
And I’d traveled extensively with my somewhat directionally challenged family, which meant we often got lost in the bad neighborhoods of big cities. A homeless man, dressed in nothing but a garbage bag and asking for spare change, had chased me down a street in New York just a few months earlier.
So my lack of fear didn’t come from extraordinary bravery of some kind — I was scared of miller moths until I was well into college — but probably from simply knowing that rubber masks and strobe lights couldn’t hold a candle to most of the things real life had in store.
Following one of our country’s worst economic downturns and given the employment, retirement andlong-term care struggles most Americans continue to face — to say nothing of the real-life tragedies we’ve experienced, from hurricanes, tsunamis, mass shootings and the like — I suspect a lot of other people have started to realize the same. We’re living at a time when you’ll get more screams from people with a bank statement than a bludgeon.
Part of that makes me glad; it’s a sign that we’re finally facing facts, I think. But it’s also incredibly sad, this idea that our reality has outpaced the worst horrors we could previously imagine.
But it doesn’t have to be like this. If my theory’s even slightly correct, I think it also proves the dramatic need for the advice of insurance agents and financial advisors these days. With a suitable plan in place, a lot of people could avoid the real-life horrors of unpaid bills and underfunded retirements.
And the faster producers can ease clients’ worst fears, the sooner they can get back to freaking out over corn-syrup blood. Or, if they’re like me, making fun of it.
Happy Halloween!
Studies: Target couples for life insurance
By Carrie Burns
Source: https://eba.benefitnews.com
Thirty-nine percent of U.S. adults do not have life insurance, according to survey results released by InsuranceQuotes.com. And many of the 2,000 Americans surveyed who do have life insurance appear to be underinsured and not as knowledgeable as they should be about their policies.
These results and other survey results from ING and MetLife, all announced in conjunction with Life Insurance Awareness Month, suggest that a substantial number of Americans are inadequately prepared for end-of-life issues.
Today, ING announced findings from a consumer study of attitudes and behaviors toward life insurance. According to the research, “Insurance Revealed,” 78% of respondents — 1,006 adults over the age of 25 — viewed life insurance as a valuable tool for estate or financial planning, and 53% believed that the current economy makes life insurance even more important today than in past years. However, 51% of respondents cited other priorities, such as paying off debt or a mortgage, as major obstacles to purchasing life insurance.
The study also revealed individuals who purchased life insurance face-to-face with a financial professional felt the most confident and knowledgeable about their coverage, and 49% look to their employer as the only source for insurance coverage. Employees without access to life insurance benefits at the workplace were seven times more likely to have no coverage at all than employees who did have access.
Meanwhile, 61% had never calculated their life insurance needs and 44% had little or no confidence that the amount of life insurance coverage they had was sufficient.
The study also showed communication is an area for further opportunity. While 62% identified family as the number one reason to purchase life insurance, many couples confirmed that they avoid discussing the issue. Among married respondents, 45% had rarely or never talked with their spouse about what would happen to the family finances should one of them pass away.
MetLife’s 10th Annual “Employee Benefits Trends Study,” released last week, highlighted similar findings. It found that marriage appears to be a catalyst for working men and women to obtain life insurance protection. However, when children enter into the equation, parents are not adjusting life insurance coverage to accommodate the change. About half of single working men and women without children have some amount of life insurance, a percentage that climbs to 72% for married workers without minor children but only increases marginally, to 75%, for married couples with youngsters.
The study found that workers both with or without minor children have, in general, only about three times their annual household income covered by life insurance. This amount may be inadequate with the addition of children as the number and age of dependents should be taken into consideration when determining the amount of coverage needed.
Many worry, don’t communicate about life insurance
Source: ebn.benefitnews.com
Most people believe the current economic climate has made life insurance more relevant, but a majority have not calculated their need and many avoid discussing the topic at home, according to survey results released today by ING.
A vast majority of respondents, 78%, view life insurance as a valuable financial tool, but, despite historically low rates, ING says more than half of the uninsured cite cost as a factor. Employed respondents without access to life insurance as a workplace benefit were seven times more likely to have no coverage at all.
But many of the problems are not related to the workplace at all: 54% of parents have not determined their family’s adequate protection level and 45% of married survey participants rarely or never discuss what would have to family finances should they or their spouse pass away.
“Life insurance is one of the least discussed components of a family’s financial plan, yet it plays such an integral role in providing for a secure future,” says Butch Britton, CEO of ING U.S. Insurance. “Without candid conversations among spouses, family members and financial professionals, many Americans risk being underinsured and having inadequate coverage in the event of a loss.
“We hope our study and outreach efforts, especially during Life Insurance Awareness Month, can help initiate the necessary conversations that lead to greater protection and, ultimately, greater peace of mind.”
Some 44% of those questioned had little or no confidence that their coverage was sufficient and nearly a quarter of those age 25 to 34 thought they were too young to purchase life insurance.
However, on a positive note, ING reports that the 56% of those who felt very or extremely confident and knowledgeable about their coverage rises to 70% for those who purchase life insurance face-to-face with a financial professional.
Many Say Life Insurance Is More Important than Ever in Current Economy
Sources: sacbee.com and ING U.S.
Family is key driver for purchase decisions; majority confirm benefits of coverage, yet inaction and lack of communication continue to pose barriers
MINNEAPOLIS, Sept. 12, 2012 -- /PRNewswire/ -- In support of Life Insurance Awareness Month, ING U.S. today released findings from a new consumer study that underscores striking disconnects in attitudes and behaviors toward life insurance.
To view the multimedia assets associated with this release, please click Here
According to the research, Insurance Revealed, most survey respondents (78 percent) viewed life insurance as a valuable tool for estate or financial planning, and more than half (53 percent) believed that the current economy makes life insurance even more important today than in past years. For more information on the study, please visit the ING U.S. newsroom at ING.us/Newsroom
However, despite recognizing its value and importance, a significant number (51 percent) cited other priorities, such as paying off debt or a mortgage, as major obstacles to purchasing life insurance. Meanwhile, 61 percent had never calculated their life insurance needs and only one-quarter of those insured felt extremely confident that they had enough coverage.
The study also showed communication is an area for further opportunity. While 62 percent identified family as the number one reason to purchase life insurance, many couples confirmed that they avoid discussing the issue. Among married respondents, 45 percent had rarely or never talked with their spouse about what would happen to the family finances should one of them pass away.
"Life insurance is one of the least discussed components of a family's financial plan, yet it plays such an integral role in providing for a secure future," said Butch Britton, CEO of ING U.S. Insurance. "Without candid conversations among spouses, family members and financial professionals, many Americans risk being underinsured and having inadequate coverage in the event of a loss. We hope our study and outreach efforts, especially during Life InsuranceAwareness Month, can help initiate the necessary conversations that lead to greater protection and, ultimately, greater peace of mind."
According to the findings, respondents were most familiar with the protection benefits of life insurance and they placed the greatest value on the more obvious uses such as replacing lost income (26 percent) and paying off debt (23 percent). Very few highlighted its value to protectretirement savings (4 percent) or build wealth (1 percent). Insurance Revealed illustrated that life insurance's unique ability to grow assets is underappreciated.
Coverage Conundrum
Regarding coverage matters, the ING U.S. study found close to half (44 percent) of Americans had little or no confidence that the amount of life insurance coverage they had was sufficient. Close to one quarter (23 percent) of those between 25 and 34 thought they were too young to purchase life insurance.
Meanwhile, the study underscored the important role that the workplace represents in obtaining coverage. Nearly half of insured respondents (49 percent) said they looked to their employer as the only source for insurance coverage. Employees without access to life insurance benefits at the workplace were seven times more likely to have no coverage at all than employees who did have access.
On another positive note, the ING U.S. study revealed individuals who purchased life insuranceface-to-face with a financial professional felt the most confident and knowledgeable about their coverage. Among that group, seven-in-ten (70 percent) felt very or extremely confident about their coverage compared to just 56 percent for all insured respondents.
Additional findings from the ING U.S. Insurance Revealed study included the following:
- A majority of parents (54 percent) had not calculated how much life insurance they need to adequately protect their family.
- A majority of uninsured Americans (51 percent) considered life insurance to be an expense they couldn't afford — despite historically low rates.
- More than half (56 percent) of those with life insurance had secured only up to three times or less of their annual salary in coverage.
- More than one quarter (27 percent) felt they should have five to ten times their annual salary in coverage. However, only 17 percent of insured respondents actually had this amount.
- Half of insured respondents knew somebody who was positively impacted by life insurancecompared to only one-third (34 percent) of uninsured respondents.
The Facts of Life Insurance
ING U.S. is promoting greater awareness and understanding of life insurance through a multi-faceted, ongoing educational effort to mark Life Insurance Awareness Month in September. Intended for both consumers and financial professionals, the ING U.S. initiative highlights the many benefits of life insurance and how it can be used to meet a variety of financial goals.
ING U.S. encourages consumers to take the appropriate steps today to learn about life insuranceand factor it into their overall financial planning. As a leading insurance provider, ING U.S. offers a comprehensive suite of tools and resources including INGForLife.com where consumers can find helpful and easy-to-use insurance information. In addition, financial professionals can use this online resource as a valuable tool to start conversations with clients. To help employees with life insurance, ING U.S. provides comprehensive group and voluntary life insurance protection through the workplace.
ING U.S. offers extensive education to build awareness of the versatile uses for life insurance — from income protection to accumulation. A full gamut of seminars, conferences, consultative support and targeted materials are available to ING U.S.'s wide distribution network to educate and raise awareness about life insurance.
For more information on ING U.S.'s Insurance Revealed study, please visit the ING U.S. newsroom at ING.us/Newsroom.
1. Findings are from an online survey conducted by Praxis Research Partners in July 2012. Respondents were 1,006 adults over the age of 25 with an annual household income of $50,000 or greater. Data were weighted to make the results representative of the U.S. population.
Life Insurance Awareness Month: Who Needs Life Insurance?
Source: Lifehappens.org
If someone will suffer financially when you die, chances are you need life insurance. Life insurance provides cash to your family after your death. This cash (known as the death benefit) replaces your income and can help your family meet many important financial needs like funeral costs, daily living expenses and college funding. What’s more, there is no federal income tax on life insurance benefits. Most Americans need life insurance. To figure out if you need life insurance, you need to think through the worst-case scenario. If you died tomorrow, how would your loved ones fare financially? Would they have the money to pay for your final expenses (e.g., funeral costs, medical bills, taxes, debts, lawyers’ fees, etc.)? Would they be able to meet ongoing living expenses like the rent or mortgage, food, clothing, transportation costs, healthcare, etc? What about long-range financial goals? Without your contribution to the household, would your surviving spouse be able to save enough money to put the kids through college or retire comfortably? The truth is, it’s always a struggle when you lose someone you love. But your emotional struggles don’t need to be compounded by financial difficulties. Life insurance helps make sure that the people you care about will be provided for financially, even if you’re not there to care for them yourself. To help you understand how life insurance might apply to your particular situation, we’ve outlined a number of different scenarios below. So whether you’re young or old, married or single, have children or don’t, take a moment to consider how life insurance might fit into your financial plans.
You’re Married
When you’re married, you share everything with your significant other, including your financial obligations. Many people mistakenly believe that they don’t need to think about life insurance until they have children. Not true. What it one of you were to die tomorrow? Even with the surviving spouse’s income, would that person be able to pay off debts like credit-card balances and car loans, let alone cover the monthly rent and utility bills. If you’re planning to have children, you’ll want to buy life insurance right away and not wait until the mom-to-be is pregnant. Some companies won’t issue a policy to a woman during her pregnancy. Since health complications sometimes arise, they’ll want to wait until after the baby is born to issue the policy. Buying insurance before a baby is on the way helps avoid this potential problem.
You’re Married With Kids
Most families depend on two incomes to make ends meet. If you died suddenly, could your family maintain their standard of living on your spouse’s income alone? Probably not. Life insurance makes sure that your plans for the future don’t die when you do.
You’re a Single Parent
As a single parent, you’re the caregiver, breadwinner, cook, chauffeur, and so much more. Yet nearly four in ten single parents have no life insurance whatsoever, and many with coverage say they need more than they have. With so much responsibility resting on your shoulders, you need to make doubly sure that you have enough life insurance to safeguard your children’s financial future.
You’re a Stay-At-Home Parent
Just because you don’t earn a salary doesn’t mean you don’t make a financial contribution to your family. Childcare, transportation, cleaning, cooking and other household activities are all important tasks, the replacement value of which is often severely underestimated. Surveys have estimated the value of these services at over $40,000 per year. Could your spouse afford to pay someone for these services? With life insurance, your family can afford to make the choice that best preserves their quality of life.
You Have Grown Children
As the years go by, you may feel your need for life insurance has passed. But just because the kids are through college and the mortgage is paid off doesn’t necessarily mean that Social Security and your savings will take care of whatever lies ahead. If you died today, your spouse will still be faced with daily living expenses. What if your spouse outlives you by 10, or even 30 years, which is certainly possible today. Would your financial plan, without life insurance, enable your spouse to maintain the lifestyle you worked so hard to achieve? And would you be able to pass on something to your children or grandchildren?
You’re Retired
Did you know that depending on the size of your estate, your heirs could be hit with a large estate tax payment after you die (45% of your estate). The proceeds of a life insurance policy are payable immediately, allowing heirs to take care of estate taxes, funeral costs, and other debts without having to hastily liquidate other assets, often at a fraction of their true value. And life insurance proceeds are generally income tax free and can be arranged to avoid probate. Finally, if your insurance program is properly structured, the proceeds from your life insurance policy won’t add to your estate tax liability.
You’re a Small Business Owner
Besides taking care of your family, life insurance can also protect your business. What would happen to your business if you, one of your fellow owners, or perhaps a key employee, died tomorrow? Life insurance can help in a number of ways. For instance, a life insurance policy can be structured to fund a “buy-sell” agreement. This would ensure that the remaining business owners have the funds to buy the company interests of a deceased owner at a previously agreed upon price. That way, the owners get the business and the family gets the money. To protect a business in case of the death of a key employee, “key person insurance,” payable to the company, provides the owners with the financial flexibility needed to either hire a replacement or work out an alternative arrangement.
You’re Single
Most single people don’t need life insurance because no one depends on them financially. But there are exceptions. For instance, some single people provide financial support for aging parents or siblings. Others may be carrying significant debt that they wouldn’t want to pass on to family members who survive them. Insurability is another reason to consider life insurance when you’re single. If you’re young, healthy and have a good family health history, your insurability is at its peak and you’ll be rewarded with the best rates on life insurance. If you anticipate a need for life insurance down the road (e.g., you’re the marrying type) and you can fit the premiums into your budget, it might make sense to lock in coverage while you’re young and single. Doing so can eliminate the worry of having to qualify for coverage when you’re older and maybe not as healthy as you once were.
Life Insurance Awareness Month: Who Needs Life Insurance?
Source: Lifehappens.org
Life insurance may be one of the most important purchases you’ll ever make. In the event of a tragedy, life insurance proceeds can help pay the bills, continue a family business, finance future needs like your children’s education, protect your spouse’s retirement plans, and much more. This section can help you gain a better understanding of life insurance and its role within a sound financial plan, and answer many of your questions. You’ll find information and interactive tools to help you get a sense of how much and what kind to buy, plus information about how different life events, such as having children or buying a home, can affect your insurance needs. For those ready to consider a purchase, there’s advice for finding and working with an agent, and an agent locator search engine to help you find a qualified insurance professional in your area.
If someone will suffer financially when you die, chances are you need life insurance. Life insurance provides cash to your family after your death. This cash (known as the death benefit) replaces your income and can help your family meet many important financial needs like funeral costs, daily living expenses and college funding. What’s more, there is no federal income tax on life insurance benefits. 
Most Americans need life insurance. To figure out if you need life insurance, you need to think through the worst-case scenario. If you died tomorrow, how would your loved ones fare financially? Would they have the money to pay for your final expenses (e.g., funeral costs, medical bills, taxes, debts, lawyers’ fees, etc.)? Would they be able to meet ongoing living expenses like the rent or mortgage, food, clothing, transportation costs, healthcare, etc? What about long-range financial goals? Without your contribution to the household, would your surviving spouse be able to save enough money to put the kids through college or retire comfortably? The truth is, it’s always a struggle when you lose someone you love. But your emotional struggles don’t need to be compounded by financial difficulties. Life insurance helps make sure that the people you care about will be provided for financially, even if you’re not there to care for them yourself. To help you understand how life insurance might apply to your particular situation, we’ve outlined a number of different scenarios below. So whether you’re young or old, married or single, have children or don’t, take a moment to consider how life insurance might fit into your financial plans.
You’re Married
When you’re married, you share everything with your significant other, including your financial obligations. Many people mistakenly believe that they don’t need to think about life insurance until they have children. Not true. What it one of you were to die tomorrow? Even with the surviving spouse’s income, would that person be able to pay off debts like credit-card balances and car loans, let alone cover the monthly rent and utility bills. If you’re planning to have children, you’ll want to buy life insurance right away and not wait until the mom-to-be is pregnant. Some companies won’t issue a policy to a woman during her pregnancy. Since health complications sometimes arise, they’ll want to wait until after the baby is born to issue the policy. Buying insurance before a baby is on the way helps avoid this potential problem.
You’re Married With Kids
Most families depend on two incomes to make ends meet. If you died suddenly, could your family maintain their standard of living on your spouse’s income alone? Probably not. Life insurance makes sure that your plans for the future don’t die when you do.
You’re a Single Parent
As a single parent, you’re the caregiver, breadwinner, cook, chauffeur, and so much more. Yet nearly four in ten single parents have no life insurance whatsoever, and many with coverage say they need more than they have. With so much responsibility resting on your shoulders, you need to make doubly sure that you have enough life insurance to safeguard your children’s financial future.
You’re a Stay-At-Home Parent
Just because you don’t earn a salary doesn’t mean you don’t make a financial contribution to your family. Childcare, transportation, cleaning, cooking and other household activities are all important tasks, the replacement value of which is often severely underestimated. Surveys have estimated the value of these services at over $40,000 per year. Could your spouse afford to pay someone for these services? With life insurance, your family can afford to make the choice that best preserves their quality of life.
You Have Grown Children
As the years go by, you may feel your need for life insurance has passed. But just because the kids are through college and the mortgage is paid off doesn’t necessarily mean that Social Security and your savings will take care of whatever lies ahead. If you died today, your spouse will still be faced with daily living expenses. What if your spouse outlives you by 10, or even 30 years, which is certainly possible today. Would your financial plan, without life insurance, enable your spouse to maintain the lifestyle you worked so hard to achieve? And would you be able to pass on something to your children or grandchildren?
You’re Retired
Did you know that depending on the size of your estate, your heirs could be hit with a large estate tax payment after you die (45% of your estate). The proceeds of a life insurance policy are payable immediately, allowing heirs to take care of estate taxes, funeral costs, and other debts without having to hastily liquidate other assets, often at a fraction of their true value. And life insurance proceeds are generally income tax free and can be arranged to avoid probate. Finally, if your insurance program is properly structured, the proceeds from your life insurance policy won’t add to your estate tax liability.
You’re a Small Business Owner
Besides taking care of your family, life insurance can also protect your business. What would happen to your business if you, one of your fellow owners, or perhaps a key employee, died tomorrow? Life insurance can help in a number of ways. For instance, a life insurance policy can be structured to fund a “buy-sell” agreement. This would ensure that the remaining business owners have the funds to buy the company interests of a deceased owner at a previously agreed upon price. That way, the owners get the business and the family gets the money. To protect a business in case of the death of a key employee, “key person insurance,” payable to the company, provides the owners with the financial flexibility needed to either hire a replacement or work out an alternative arrangement.
You’re Single
Most single people don’t need life insurance because no one depends on them financially. But there are exceptions. For instance, some single people provide financial support for aging parents or siblings. Others may be carrying significant debt that they wouldn’t want to pass on to family members who survive them. Insurability is another reason to consider life insurance when you’re single. If you’re young, healthy and have a good family health history, your insurability is at its peak and you’ll be rewarded with the best rates on life insurance. If you anticipate a need for life insurance down the road (e.g., you’re the marrying type) and you can fit the premiums into your budget, it might make sense to lock in coverage while you’re young and single. Doing so can eliminate the worry of having to qualify for coverage when you’re older and maybe not as healthy as you once were.