Do You Have Enough Life Insurance?
A recent study shows Americans have even less insurance since the recession, leaving their families vulnerable.
“Life insurance is usually last on the list of important-but-necessary items people want to spend money on, because, let’s face it, no one wants to dwell on the circumstances in which it could come in handy. Now, in the wake of the Great Recession, people have even less insurance than before, which leaves families unprepared to cope with potential tragedy.
The gap between the amount of life insurance Americans actually have and the amount they think they need has now widened to about $320,000, according to a recent survey of 1,004 respondents by New York Life Insurance. Respondents on average said they needed about $540,000 worth of insurance, but they only had $220,000 last year.
Similarly, between 2004 and 2010, the number of people with life insurance dropped from 78 percent to 70 percent, says Bob Kerzner, CEO and president of LIMRA, a financial services industry group. “So three in 10 households in the United States have absolutely no life insurance whatsoever,” he says. He attributes the large drop partly to the recession and the fact people don’t – or at least think they don’t – have the money to afford a life insurance policy.
Kerzner says people tend to think that life insurance is about three times more expensive than it actually is. “There’s the perception that it costs more than it does, so they think it won’t fit into their budget, even when it might,” he adds. LIMRA surveys have also found that about half of households say they believe they don’t currently have enough life insurance.
“Young people in general tend to assume they’re absolutely invulnerable,” says Steven Weisbart, chief economist for the Insurance Information Institute. But young adulthood is also an ideal time to lock in low rates on policies, he adds. “When you’re young, it’s really cheap … This is a good time to buy,” he says.”
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