Life insurance coverage might not be the first thing you think of when considering your financial planning. However, it is an extremely important component of that planning. If the unexpected happens, the people you leave behind could be left with the very same financial hardships you’ve been working so hard to prevent, especially if you haven't put the proper life insurance in place. Sadly, as you'll see from the data below, most people fall into one of two categories: uninsured or underinsured.
Survey: 39% Have No Life Insurance
If life insurance hasn’t made it to your priority list, you aren’t alone. An August 2012 survey from Harris Interactive found that 39% of respondents had no coverage. Most people thought it would cost them too much, but many hadn’t even considered whether they need it. In short:
Of the 39% with no coverage:
- Costs too much: 45%
- Haven’t thought about it: 23%
- Don’t think they need it: 20%
- Partner provides coverage: 6%
61% with Life Insurance are Open to Risk
People who had life insurance coverage had not eliminated their risk, either, though. How much coverage is needed is based on many variables. There are the immediate expenses, of course, such as funeral expenses. Then there are longer-term considerations, such as mortgages, college expenses, and inflation.
The survey found that 61% of respondents had too little coverage based on a rule of thumb that a million dollar policy would be sufficient to cover a median household income of $50,000. Most of these respondents hadn’t really considered how much life insurance would be needed to take care of those left behind when all the variables are considered.
Of the 61% with too little coverage based on their income:
- $100,000 of coverage or less: 53%
- $100,000 to $250,000: 20%
- $250,000 to $1,000,000: 15%
- $1,000,000 or above: 2%
(You can see an infographic of this data here.)
As you can see, most Americans are woefully unprepared or under-prepared when it comes to life insurance. But it really doesn’t have to be this way since these policies can be very affordable and flexible.
To protect the work you’ve done in life, and protect those you leave behind, talk with an insurance adviser about your specific situation. They can help you consider all the variables and calculate what amount of life insurance you should incorporate into your financial planning.
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