In the 2018 LIMRA Life insurance Barometer study, 60% of Americans own a life insurance policy. However, continuing the trend that first started in 2017, more Americans are now covered by a group life insurance plan than by an individual plan they purchased.
2017 was the first year since LIMRA began tracking the issue in 1960 that group insurance was more popular than individual plans.
Group life insurance is great, often the benefit is free, so why not accept it. The problem is not accepting the group plan, the problem is the client believing that they no longer need to discuss an individual plan.
Some companies will offer a flat amount of $25,000 to $100,000 of life insurance as a group benefit, while others will offer a multiple of the employee’s salary. If you are one of the lucky few to be debt free, or you do not yet have dependents, then this basic life insurance policy may be all you need.
However, if you have a mortgage, have children, or other debts, than the minimum amount of life insurance you need is 10x your annual salary. Here is a quick Needs analysis based on the acronym DIME:
D – Debt – any debt you have, credit cards, college loans etc.
I – Income – how many years of your income will your family need to get your children through their younger years? How long do you want to provide your income to your surviving spouse? Calculate your current income by that timeframe
M – Mortgage – what is your current mortgage amount, to make sure that your family can stay in your home after your passing
E – Education – College costs are continuing to increase; do you want to leave funds for your children to be able to go to college?
If you go through the above exercise, I promise you, the result will be more than the current group policy that you have. That is where individual life insurance becomes so important.
Most of the above needs are temporary, and or decreasing which is why Term Life insurance is so popular. It provides temporary life insurance for a period of time for much less cost than a permanent form on life insurance.
Those of you with only coverage through work, are you aware that you will most likely lose your life insurance when you leave your job?
Those of you approaching retirement age, what is your plan when you retire? It is true that for most people the need for a large life insurance policy decreases over time. As we age the temporary/decreasing needs we had are gone, and it may be time to look at a more permanent solution to our life insurance need. After retirement, you may still have a mortgage, but you will certainly still have upkeep on your home. Where will the money come from to replace your roof, or furnace? Most likely from your retirement savings. Permanent life insurance is a way to replenish your retirement savings when you die. It can make sure that your spouse can live a long a comfortable retirement.
Having Life Insurance through work is a good thing. Some coverage is better than none. However, the cost of term life insurance is lower than it ever has been. Take advantage of that and protect your family with the right amount of Life insurance!