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Life Insurance Awareness Month: How to tackle the growing life insurance gap

By: Dan Johnson, Vice President of Sales and Marketing

Today’s employees are empowered to make their own insurance decisions. Sometimes that creates a balancing act – between costs and priorities. In this marketplace, life insurance is, unfortunately, one of the areas that often takes a backseat. But is that the right direction for employees? Usually not. Since September is Life Insurance Awareness Month, it’s the perfect time to look at this situation, what may cause it, and some possible solutions. 

A look at some of the numbers

Life insurance is such an important part of a financial picture, but many don’t have coverage:
  • 48% of households are underinsured in life insurance by an average of $200,000.1
  • The total current estimated coverage gap for life insurance is $12 trillion and grows by $340 billion each year.1
  • Despite being a key component of financial security, 46 percent of Americans have no life insurance coverage of any kind.2

Why does the gap exist?

It’s tough to say exactly why there is a coverage gap when it comes to life insurance. In truth, many Americans know they need life insurance (85 percent)3 but there are several factors and some misconceptions about life insurance:
  • The distribution system has changed – The kitchen table sale is mainly a thing of the past. Insurance companies aren’t growing this distribution system, and with the time crunched families, there is little time to eat at the kitchen table let alone buy insurance over it. 
  • Costs – 2 in 3 adults think life insurance is too expensive, but most overestimate the cost by more than 3 times.4
  • Confusion – More than 4 in 10 consumers say they haven’t purchased life insurance because they don’t know how much they need or what type to buy.2 
  • Life stage – Many overlook life insurance because they are young or healthy, but with credit card debt, starting a family, loans from education or buying a house, the risks are very real and 1 in 3 households would immediately have trouble paying life living expenses given the loss of a primary wage earner.5

The voluntary solution

Enrolling in a voluntary universal life policy in a one-on-one or call center enrollment opens the door to the kind of insurance education that many policyholders so desperately need. Many voluntary group term life programs complimented with a Universal Life product offer short- and long-term solutions for the employee and their family.

Voluntary Universal Life from Trustmark offers many advantages. It’s portable, and usually the insured keeps the same rates and benefits if they leave employment or retire, unlike many Voluntary group term life plans that are offered. It’s also priced to last until age 100, unlike a term policy.

Another great feature of some universal life policies are living benefits, such as long term care, or terminal illness benefits. These can be made available for the employee, spouse, and children - and in some cases, grandchildren. Universal Life also provides the flexibility to grow through an automatic guaranteed issue-future purchase option. This increases the base death benefit and living benefits for roughly a $1.00 per week increase per year, for up to 10 years. It’s a perfect budget-friendly option for employees and their spouses – to start low and grow. 

The real solution is that more people get the life insurance coverage they need, whatever form that may take. Hopefully, understanding the situation and the causes of the coverage gaps will help more people to “see the light” and buy the protection they need.

1 Opportunity Knocks: The U.S. Life Insurance Market 2016. LIMRA.
2 Facts About Life 2017. LIMRA. Sept. 2017. 
3 2017 Insurance Barometer Study Reveals That Consumers Want Transparent Life Insurance Buying Options. LifeHappens.org. 2017.
4 2017 Insurance Barometer Study, Life Happens and LIMRA.
5 2016 Insurance Barometer Study, Life Happens and LIMRA.