In these challenging economic times, Americans have made numerous adjustments to shore up their family finances. Savings rates are on the rise, debt is being consolidated and slowly paid down, and people are spending and investing their money more conservatively. It may be time to add another trend to the list. According to a survey released by the nonprofit LIFE Foundation, 56 percent of Americans say the economic downturn has made it more important to have life insurance, compared to just nine percent who believe the need has diminished. Moreover, over the past year more people appear to have added to their life insurance coverage than have lost or reduced their coverage.
Is History Repeating Itself?
Historically, life insurance sales receive a boost when consumers feel financially vulnerable due to downturns in the economy and stock market. However, many experts believed that the current recession might be the one to buck the historical trend because of its severity. With family budgets significantly strained, experts believed that many would drop coverage and new policies sales might plummet. Though it is too early to know for sure what the ultimate impact will be, the LIFE survey suggests that the dire predictions will not come to pass.
“The American people are smart and understand the importance of protecting their loved ones with life insurance, especially in these uncertain financial times,” said Marvin H. Feldman, CLU, ChFC, RFC, president and CEO of LIFE. “Americans realize that life insurance can be the safety net that catches their family when tragedy strikes, and we’re pleased to see that so many appear to be holding onto their coverage, even as they’re scaling back other parts of the family budget to make ends meet.”
Who’s Adding and Who’s Subtracting
The LIFE survey found that a majority of Americans with life insurance coverage, 71 percent, made no changes to their coverage over the past year. Of those who did make alterations, 39 percent increased existing coverage and 28 percent bought life insurance for the first time. Of those who added coverage, the reasons cited for their decision include a desire to upgrade existing coverage, a need to keep up with their family’s growing needs, and a desire for extra protection because they feel more financially vulnerable.
The downturn in the economy has clearly contributed to some Americans dropping or decreasing their coverage in the last 12 months. Of those who made changes, 33 percent lost coverage either due to a job loss or a job change. Fourteen percent of Americans who altered their plans cancelled their coverage altogether, while 11 percent decreased their coverage.
Three Tips for These Tough Times
If you are one of the millions of Americans who knows that life insurance is important to protect your family but you have not updated your coverage recently, the nonprofit LIFE Foundation offers three tips to help you get your insurance house in order:
1. Some coverage is better than none at all – If your budget is tight, keep in mind that there are affordable options in the marketplace. For instance, a healthy 35-year-old can buy a 10-year, $250,000 term policy for as little as $180 a year, or less than 50 cents a day. A smaller coverage amount can lower your premium payments, as would a shorter coverage period on a term insurance policy. If your financial circumstances change, hopefully you will have the ability to add to your coverage at a later date.
2. Educate yourself – There a number of helpful resources on the internet, including the LIFE Foundation website at www.lifehappens.org. The site provides general information about life insurance in addition to an online calculator that can provide you with a general sense of how much life insurance you may need.
3. Talk to an Expert – Online resources are helpful, but they are no substitute for the advice you can get from an insurance professional in your community. An insurance agent can conduct a thorough review of your financial goals and circumstances, and help you determine how much and what kind of life insurance might be right for you. If you don’t have an agent, seek recommendations from friends, family members, or a trusted adviser such as your lawyer or accountant.