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August 20, 2013 at 09:28 AM
An overwhelming majority of consumers are underinsured, new research shows.
That’s the word from Nationwide Financial, which reveals in a survey that 98 percent of consumers who are married, partnered or have a dependent lack enough life insurance coverage to replace their income. The average consumer polled will earn approximately $1.5 million before they retire and currently holds about $300,000 in life insurance coverage, leaving them about $1.2 million short of replacing their income with life insurance.
“Too many Americans make the mistake of assuming that simply providing what may appear to be a large lump sum of money for their beneficiaries will be enough to protect them,” says Eric Henderson, senior vice president of life insurance and annuities for Nationwide Financial.
According to the survey, many consumers are willing to pay enough to close or reduce this income replacement gap; however the average life insurance policy currently replaces just 16 percent of the income the insured person will earn before retirement. While one-third (33 percent) say their most important consideration when purchasing life insurance was replacing their income, only two percent have actually done so completely.
