Today, in many families, both mom and dad work, and both incomes are needed to pay the bills and financially provide for the family. Therefore, should either spouse die prematurely, the family could face financial difficulty from having to cope with one less income. So, it’s important that both women and men have a life insurance policy and that it provides the right amount of coverage for the family.
According to MetLife’s 9th annual Employee Benefits Trends Study (2011), women are more concerned about the financial impact of their premature death to their families than men, but they generally have less life insurance coverage. Those who have insurance are often unaware of the amount and type of coverage they possess. Most importantly, many women underestimate how much life insurance is the right amount to meet their financial needs.
There are many reasons women have less life insurance than men. MetLife’s research revealed — not surprisingly — that women take pride in protecting their families. But, oftentimes, that notion of protection doesn’t necessarily extend to the world of financial protection. It is important for producers to be able to articulate some of the lesser-known benefits of the different types of life insurance products and how these benefits can help women achieve certain high-priority financial objectives.
For example, MetLife’s benefits study also found that 67% of working women are very concerned about outliving their retirement money. Financial professionals can help address this concern by outlining how certain permanent life insurance products can help women accumulate money to potentially supplement their retirement income.*
MetLife-commissioned research from Nielsen/Claritas found that 44% of higher-income women (women making more than $50,000) believe life insurance costs more than they can afford, and 67% of higher-income women believe selecting life insurance products is a complicated process. To address the cost concern, producers may want to point out that premiums for women are often lower than the premiums men pay for the same amount of coverage. To address the concern about the buying process, producers might consider proactively outlining each step in the sale, so women understand where they currently are and what to expect next.
Encourage women to take a fresh look
Working women who do have life insurance mostly have term coverage. MetLife’s Employee Benefits Trends study revealed that 52% of women have term life insurance, while only 22% have universal life insurance. Are producers being proactive enough to explain the features of permanent life insurance to women? Especially considering that, while life insurance is primarily designed to address death benefit protection needs, accumulation products may also help with other, more top-of-mind financial objectives, like a down payment on a house, the children’s education or retirement.
Some coverage is, of course, better than no coverage, and term life insurance may be all that a young family may be able to afford. However, as a family’s financial responsibilities grow, it is important for women to be aware of how products such as permanent life insurance can help meet their growing financial needs.
Women represent a large, underserved opportunity for producers. Just asking the simple question “When was the last time you looked at your life insurance policy?” is often a good conversation starter. Additional research (MetLife’s 2011 Life Insurance Literacy Study) found that 45% of working women with life insurance have not re-evaluated their policies since they were first obtained. If this purchase was before they were married or had children, this oversight can leave their family at risk should a woman’s income stop. In addition, if the life insurance was bought pre-marriage, pre-children or pre-divorce, the beneficiary designations likely need to be changed, in addition to the possible change of coverage amounts.
MetLife’s Life Insurance Literacy Study also found that about 1 in 5 working women with life insurance admit they don’t know how much coverage they have. A producer can play an instrumental educational role, as more than one-fourth of working Americans — men and women — are unfamiliar with the basic features of their own life insurance policies. For example, nearly one-quarter (24%) of workers who say they have term life insurance believe that this coverage offers financial protection for an unlimited amount of time. In addition, 28% of those employees who own permanent life insurance are unaware that this coverage can build cash value as they pay their premiums.
Creating new opportunities
More effective and direct communications can help increase the relevance of life insurance to women and address potential purchase barriers. It is important to emphasize the ease of choosing and purchasing life insurance. Encourage women to take advantage of their group life insurance benefits offered through the workplace and then discuss how supplemental individual life insurance can help to get the right amount of coverage to meet a woman’s family’s financial needs.
MetLife’s Life Insurance Literacy Study found that the majority of Americans expect that, after they die, their life insurance will cover their final expenses (61%), future living expenses for their partner or spouse (55%), their current debt obligations (52%) and their outstanding mortgage or rent obligations (51%). However, have they secured the appropriate amount of coverage to successfully achieve these expectations? More than 3 in 5 say life insurance can also be used for estate planning (65%) and as supplemental income for retirement (62%), and 58% believe it can be used as a way to fund their children’s education. Consumers seem to understand the concepts behind life insurance, but they need help realizing how it can be most effectively used in their own lives.
Producers play a key role in helping women discover the flexibility of permanent life insurance products. Permanent life insurance products provide a way for women to leave benefits to beneficiaries, while also potentially accumulating funds inside the policy. With properly structured and funded coverage, the growth of a policy’s cash value will be on a tax-deferred basis and may be used during a woman’s lifetime to help meet many family financial needs.
It stands to reason that approaching women with different messaging will help them evaluate life insurance products differently, which will get them closer to the ultimate goal of becoming more educated consumers with the right amount of coverage and the right policy features for their personal situation.
Gene Lunman is senior vice president and head of Individual Life Products at MetLife. In this role, Gene is responsible for product development, underwriting and policy administration. MetLife is a subsidiary of MetLife Inc., a leading global provider of insurance, annuities and employee benefit programs, serving 90 million customers in over 50 countries.
* Tax-favored distribution assumes that the life insurance policy is properly structured and not classified as a Modified Endowment Contract (MEC). Withdrawals are made up to the cost basis and policy loans thereafter. If the policy is a MEC, cash value is taxable upon withdrawal, and if withdrawn before age 59½, a 10% federal income tax penalty may apply. If a policy should lapse or be surrendered prior to the death of the insured, there may be significant tax consequences. Loans and withdrawals will decrease the cash value and death benefit. Cash value accumulation may not be guaranteed. Investments in variable life insurance are subject to market risk, including loss of principal.