September is a month of new beginnings for many families. There are back-to-school clothes to buy and class supplies to gather. For some parents, it’s time to watch a child head off to college for the first year. We spend time, at least a little bit, looking ahead and making plans for the year to come.
Many of us, however, are missing an opportunity to plan better. September is also Life Insurance Awareness Month (LIAM) and we are in an era where individual life insurance ownership stands at a 50-year low. Some 35 million American households are uninsured, according to the industry organization LIMRA’s 2012 LIAM Fact Sheet, with tragic consequences in store if a breadwinner dies unexpectedly. Many more households admit they need broader life insurance coverage than they currently have, but don’t have the knowledge or resources to obtain it.
How should insurers and financial advisors deal with this hidden threat to families’ financial security? I say it’s back-to-school time for our existing and potential customers. There are many misperceptions about costs and options involving life insurance, and we need to make a recommitment to education, starting this month.
Let’s start with one of the biggest barriers to life insurance ownership–the perceived cost. A joint study this spring by the LIFE Foundation and LIMRA found that 83 percent of consumers deem life insurance as “too expensive.” Yet Americans overestimate the cost of annual life insurance premiums by almost three times the actual cost, according to that same study. It’s hard to make informed decisions when you’re so far off the mark.
Another issue is competing financial priorities. The economic downturn has put pressure on many families’ finances, and short-term problems with making a mortgage or rent payment often trump best intentions when it comes to long-term security.
Let’s also remember that competing priorities aren’t just an issue for consumers. Financial advisors spend much of their time talking about products other than life insurance, such as retirement savings, education funds and long-term care options for elderly parents. I would argue — and, in fact, we all should — that life insurance is a foundation that makes each of those other plans possible. Nothing can plunge a family into crisis faster than the death of a person who is the primary source of household income, and yet isn’t insured adequately.
That last point brings up another issue that often bedevils consumers: How much life insurance coverage is enough? For many families, this becomes a sticking point that they never solve, so they end up not getting coverage at all. I think we can agree on the basic premise that some coverage is better than none.