Advisors are great at encouraging consumers to save for retirement, but they often neglect talking about life insurance at a time when most Americans are dangerously underinsured – and more Millennials are open to hearing about it from financial advisors.
According to a survey released Feb. 5 by Edward Jones and nonprofit consumer education organization Life Happens, 81 percent of Americans believe their family is their most valuable asset, but less than half (41 percent) are protecting their family with an individual life insurance policy.
In fact, one-third of Americans (32 percent) indicated that life insurance is a low priority or is not a priority when starting a family, according to the recent “Protecting What Matters Most” study.
“Protecting your assets and aspirations is a critical part of a comprehensive financial strategy,” says Ken Cella, principal of the Client Strategies Group at Edward Jones. “Financial goals can be put at risk without warning, so it is essential to consider life insurance when preparing for the unexpected in order to help safeguard your family and retirement savings.”
Millennials more likely to buy from advisors
The tide is shifting for where Americans purchase life insurance. When respondents were asked where they would buy policies, insurance companies (43 percent) came in first, followed by independent agents/brokers (33 percent) and financial advisors (21 percent).
However, the study found Millennials are more likely to buy life insurance from their financial advisors than Gen Xers or Boomers (28 percent vs. 21 percent and 14 percent, respectively), helping them fit insurance planning into their holistic financial planning strategies.
“Choosing the right type and amount of life insurance can be demystified by working with a financial advisor who understands what’s most important to you, your family, your financial situation today, and your goals for the future,” Cella says. “It’s encouraging to see that younger generations are recognizing the value of discussing not just their financial goals, but also their life insurance needs with their financial advisor – the one person who understands their financial goals and how to help protect them, better than anyone else.”
Americans unprepared for the unexpected
Although Americans work hard to provide for their families and invest in their futures, one quarter of respondents said their biggest worry if they were unable to work or died tomorrow would be leaving financial burdens on loved ones. However, many do not have adequate protection if something unexpected occurs.
Many Americans understand the value of having emergency funds to cover unexpected financial expenses in the short-term, but they are less protected for the long-term financial implications. Many families have not thought beyond immediate emergencies when it comes to protecting their loved ones financially.
“Having emergency savings is critical in a pinch, but it’s not a long-term financial solution, especially if a family’s primary breadwinner were to die,” says Faisa Stafford, president of Life Happens. “That’s where life insurance comes in. And the good news is, it’s an affordable option for most.”
Americans unaware of its many uses
While a number of misconceptions surrounding life insurance deter people from purchasing individual policies, Americans’ lack of awareness of how life insurance can fit their needs is among the most detrimental to their long-term financial goals. When presented with a list of expenses that life insurance can cover, including funeral costs, retirement income, estate considerations, estate taxes, charitable donations and education costs, roughly one quarter of respondents (23 percent) were unable to identify any of these options.
For respondents who were able to identify potential uses of life insurance benefits, funeral costs (67 percent), retirement income (28 percent) and estate considerations (26 percent) were the most well-known. The number of adults aware of life insurance’s value for estate considerations drops to one quarter (25 percent) for Americans with children in their households, underscoring the lack of awareness of life insurance as an estate considerations tool.
Interestingly, Life Happens makes a big Valentine’s Day-themed push each February for consumers to “Insure Your Love,” noting that the No. 1 reason people buy life insurance is because they love someone and want to make sure they’d be protected financially is something happened to them.