National Life Insurance Awareness Month

September is National Life Insurance Awareness Month

Life insurance has the potential to mitigate wealth disparities across race. When an insured person dies, life insurance pays a large lump sum to that person’s estate. Life insurance coverage is widespread with almost 60 percent of adults having coverage.

Life insurance coverage is highest where the consequences from death of a breadwinner are greater. For example, 71 percent of married individuals with a child and mortgage have coverage in comparison to just 27 percent for individuals who are single, childless, and renters. Families not insured against early mortality of the breadwinner may end up depleting wealth, carrying balances on credit cards, or using payday loans, all of which lower wealth.

The life insurance industry provides protection to 75 million American families, and in 2009 $59 billion were paid to life insurance beneficiaries. A staggering 95 million adults have no life insurance, and those who are insured have, on average, far less than most experts recommend. Many Americans recognize the importance of life insurance. They understand it provides both peace of mind and security to families that are confronted with the death of a loved one. Yet the statistics will surprise you.

• Four in 10 adult Americans have no life insurance at all.

• Insured Americans, on average, have only about three-and-a-half times their annual income in life insurance coverage. Many insurance experts believe that people's true need for coverage is 10 times their gross annual income, and sometimes more.

• Only 35 percent of adult Americans have individual life insurance. Many rely on insurance provided by their employers, leaving many employees without coverage if they were to lose their job or change jobs.

• Each year, a significant number of Americans (600,000) die prematurely. In fact, the chances a 25-year-old male will die before reaching the retirement age of 65 is nearly 1 in 5; for a female, the odds are 1 in 9.

• When a premature death occurs, insufficient life insurance coverage on the part of the insured results in 75 percent of surviving family members having to take measures to meet financial obligations, such as work additional jobs or longer hours, borrow money, withdraw money from savings and investment accounts, and, in too many cases, move to smaller, less expensive housing.

• 84% of Americans would agree most people need life insurance, yet when asked, only 70% said they needed any.

• 41% of Americans do not carry any life insurance.

• Of those who do, nearly a third have just a basic group policy.

Whole life insurance combines both investment motives with the hedge against mortality, while term life insurance provides the pure hedge against mortality risk. At the same time, whole life coverage is thought to have less value than term coverage. Furthermore, African Americans have higher rates of participation in life insurance offered through employers.