Column 93 - Life Happens and LIMRA just released the results of the 2015 Insurance Barometer Study.

Life Happens and LIMRA just released the results of the 2015 Insurance Barometer Study. 

LIMRA is a worldwide research, consulting, and professional development organization that helps more than 850 insurance and financial services companies in 73 countries increase their marketing and distribution effectiveness.

 Life Happens was formed in 1994 by seven leading insurance producer organizations, which recognized the need to better educate the public about important insurance planning topics.

Some of the key findings are :

  • Cost is the reason most Americans give for not owning life insurance, BUT 80% of consumers misjudge the price for term life insurance
  • Millenials overestimate the cost by 213% and Gen Xers by 119%
  • 30% of Americans believe they need more life insurance and more than 2 in 5 say they would feel a financial impact within 6 months if the primary wage-earner were to die

Most Americans continue to put other financial priorities ahead of purchasing life insurance:

  • 29% of Millennials cited saving for vacation over purchasing life insurance
  • 23% Gen Xers prioritize paying for recreational activities such as going out to eat, movies or shopping instead of life insurance
  • 49% of those 65 and older opt for paying for expenses such as Internet, cable and cell phones over life insurance

I think the initial issues cited are very telling.  In my practice, I am always a little bemused by those who haven't really addressed this issue.  Most people are optimists by nature, figuring that premature death is going to "happen to the other guy".   But what they fail to recognize is that most of us simply do not have the resources to replace the income of a breadwinner or even second income spouse.

I think it is important to ask the question, "What would happen if our income stopped tomorrow?"  Our ability it earn an income is the greatest asset in our portfolio.  I often hear the response, "My spouse would work".  But in reality the spouse is often already working. If the family is saving 100% of the spouse's income, I would concede that would solve at least a part of the problem. But that is rarely, if ever true.  Further there may be big disparity between income and earning ability of the spouses.

I agree that most people overestimate the cost, particularly of term insurance.  When my son was newly married they were barely paying rent, let alone thinking about life insurance.

I bought a 20 year term life insurance policy on him and his wife.  The premium for each was about $200 per year. This gave me tremendous peace of mind.  I knew that if something should happen to either of them, there would be funds available to "keep them in their own world" until they adjusted to the new reality.  Further, I was able to provide a valuable gift to them later, when I presented them with the policy for them to pay the premiums.  They had insurance at the rate of a 21 year old, rather than the rate at their current ages.

I fully understand that there are other priorities for all families. I would even concede that internet and cell phone service may be almost basic necessities in today's society.  But I will not ever concede that cable or pay TV is something that ranks over the future financial security of your family. Of course, by age 65, hopefully, most people have this issue covered.

 At the risk of sounding pompous, I am a bit of a TV snob.  I rarely watch TV and when I do, I am almost always looking at Channel 9.  (Yes this is a shameless plug for our local public TV station.) Public TV is free!

There are many different varieties of life insurance, but the main thing to remember is that it is simply a financial tool: a way to replace income in the event of death.  Humans have a 100% mortality rate.  We know none of us is "going to get out of this alive".  The key is that we usually don't know when it's going to happen.  This product is purchased because someone cares about those that will be left behind,  pure and simple. .