Working women with life insurance are also nearly twice as likely as men (21% vs. 12%) to acknowledge they don’t know how much coverage they have and are also more likely to underestimate how much coverage they need. The study states that a good starting place for life insurance coverage is typically outstanding debt plus five years of salary. However, 54% of women and 47% of men believe coverage equal to their outstanding debt plus three years of salary or less will be adequate. While only one in four men or women considered outstanding debt when calculating their life insurance needs, 52% want their death benefit to cover these obligations.
I think the correct number for life insurance should be a minimum of 10 times income and could be much higher based on family and economic conditions. The LIFE Foundation’s calculators—the Life Insurance Needs Calculator and the Human Life Value Calculator—can help you determine the correct amount for your situation and lifestyle.
The study also pointed out that men and women have different desires for what they want their insurance policies to cover. Nearly three-quarters (73%) of married men say their No. 1 expectation for their life insurance coverage is to pay for future living expenses for their spouse, compared with 47% of married women. For married women, the No. 1 expectation is to cover their final expenses (69% vs. 55% of married men). However, both married men and women express nearly identical levels of interest in protecting the financial futures of their children.
“It’s so important to be an educated consumer when it comes to developing a strong financial plan. Women should not only consider life insurance coverage on themselves to protect loved ones, but also encourage spouses or partners to have coverage as well. Otherwise, the sudden loss of vital income may have a long-term negative impact for the survivor well into retirement,” says Cindy Hounsell, president of the Women’s Institute for a Secure Retirement.
More than one-fourth of those interviewed for the study were unfamiliar with the basic features of their own life insurance policies. For example, 24% of employees who say they have term life insurance believe that this coverage offers financial protection for an unlimited amount of time. In fact, term insurance offers financial protection for a defined time period such as 10, 15 or 20 years, or if provided through an employer-maintained group policy, for the duration of employment. At the end of these time periods, the term coverage may be continued, but usually with much higher premiums. In addition, 28% of those employees who own permanent life insurance are unaware that permanent life insurance can build cash value as they pay their premiums. Permanent life insurance policies can be used to accumulate, protect and transfer wealth.
Employees may also not be leveraging life insurance as effectively as they could to meet their needs. Approximately one-third of employees with coverage do not realize that life insurance, in addition to providing a death benefit, can be a strategic method to supplement retirement benefits and aid in estate planning.
Consumer education is what the LIFE Foundation is all about. Use our resources to help you make informed decisions about life insurance to protect yourself and your loved ones.