Are You Insured? When It Comes To Life Insurance, Many Are Not

BIRMINGHAM, AL - Few people likely perk up when they are asked to talk about what their families will do when a family member dies, especially if the primary bread-winner in the family passes away. However, the subject is one that is important to discuss, and in light of numbers that show how few people in the country have any type of life insurance, that importance is magnified these days.

According to statistics by the Insurance Information Institute, only 54 percent of Americans are covered by life insurance, and Alabama is ranked 35th in the country in policies per capita. This means that almost half of Americans may not have the financial means to support themselves if a loved one dies.

This issue not only carries with it serious ramifications for individuals, but for the economy as a whole. As the baby boomer generation ages, and their families are left to cover costs of funerals, bills and maintaining possessions of their deceased family members, the need to have insurance in place is vital to the overall economy.

With all of that in mind, why are so many people reluctant to purchase life insurance? Studies have shown that some of the main reasons are fairly simple: It is expensive, and it is hard to understand. (For more updates on this story and free news alerts for your neighborhood, sign up for your local Patch morning newsletter.)

A 2017 study by LIMRA showed that the two primary explanations that Americans give for not owning life insurance is that they think it is too expensive and they have other financial priorities - including paying living expenses, building savings, managing debt and/or saving for retirement.

The LIMRA study also showed that more than half of consumers say they would have immediate or near immediate trouble paying living expenses if their primary wage earner died.

So who needs life insurance?

The simple answer, according to Brent Thompson of Birmingham's Thompson Financial, is "everyone."

Thompson, an industry veteran, said he knows and understands all of the reasons why people choose to go uninsured, but added that those reasons reflect a dangerous way of thinking.

"It's an intangible," Thompson said. "You see your car, your house, your boat. You insure those things because you can see them in front of you. But (life insurance) it is without a doubt as essential, or even more."

Insuring income, like insuring a car or house, is just as vital to a family's well-being, Thompson said, but the process and the "item" insured is significantly different. "We look at it like a goose that lays golden eggs. You insure the goose, not the egg."

More than 40 percent of consumers say they haven’t purchased life insurance because they don’t
know how much they need or what type to buy. Almost half of millennials say that they don’t buy life insurance because they haven’t been approached by a life insurance agent.

"How much to buy is the hardest question to answer," Thompson said. "Because everyone's situation is different. You have to start with what you want as a goal. Pay off your house? Spousal support for the rest of their lives? That is why it is important to talk with an agent. Meeting with an agent is a different game because a properly trained agent knows the questions to ask - and is local, not just checking the boxes they are supposed to check."

The fact that owning life insurance is not required by law, like auto insurance is, also makes people feel as though purchasing life insurance is not essential. "I cannot imagine a worse situation than someone grieving the loss of a spouse, and then on top of that having to worry about where income is coming from," Thompson said. "Income drives every decision we make. If that stops, everything else stops."

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