Potential disability is the most under-addressed topic of conversation between financial advisors and their clients.
Life insurance coverage is also frequently overlooked.
Asset-Map recently conducted a survey of 225,000 households to determine whether clients would generally be underinsured in the event of a loss of life. The data revealed that over 14,000 clients were “grossly undercovered” (with an exposure of at least $1 million) relative to their income, adding up to approximately $43 billion total in underinsurance.
Another study we ran for the same 225,000 households indicated that average household debt, typically due to a mortgage, closely matched average annual household income. But average life insurance coverage, including both household parties, was only about three times income.
This data clearly demonstrates a lack of communication between advisors and clients in regard to human life value. Although it’s common to insure assets like a home or car for their full value, too many people are underinsured relative to the economic impact they will likely generate in their lifetime.
A person’s ability to work is critical because paying debts, covering capital expenses and generating long-term security all typically depend on consistent income. As financial advisors looking out for our clients’ best interests, we must do a better job of preventing uninsured and underinsured scenarios.