I had lost track of a couple we knew from our old neighborhood. Then I got a call from my wife that “Bill” had died. A few weeks later, she told me that Bill’s widow was more furious than grieving. Apparently Bill had left his wife almost no life insurance. This upper-middle-income widow was suddenly thrust into the position of wondering how she’ll be able to live comfortably.
What made me think of this incident was a chart I saw showing how little life insurance is being purchased by American households. Seriously, less than a third of individuals own individual life insurance? Only a little more than half have life insurance from any source? This is financial madness. Do people think the medical profession has found a way to prevent death? Is no one in the country dependent on others for financial support these days?
My frustration with this issue is that consumers often act as though medical technology means people rarely die young and that people simply die at very old ages and leave no dependents. I was once told by the legislative director for a U.S. senator that life insurance has a place, but only until a person retires. He explained that a combination of Social Security and personal savings will suffice thereafter. He apparently wasn’t familiar with the concepts of spouses, children and grandchildren, of debt, or of the federal estate tax his senator voted for.
Much like retirement savings programs, the reality in the United States is that if people are going to acquire life insurance, they will do so at work. The debit system where agents dropped by houses weekly to collect quarters as premiums is long gone. The kitchen-table life insurance salesperson is still alive, but the number of agents is declining, making it increasingly difficult for individuals to access insurance in this way. This leaves the workplace.
Life insurance companies have done a good job expanding their offerings in the workplace. Far more is available than group term life insurance: voluntary life insurance plans, carve-out plans for more affluent employees, and bonus plans used to entice and retain key employees.
And the offerings go beyond product. The employee must understand the need for life insurance and get some help determining how much to own. Insurers are increasingly providing employees with both electronic and human support—calculators and advisers—to help determine appropriate coverage. In fact, one-on-one financial guidance at the worksite is a trend that is growing to help employees with all aspects of their financial planning.
My concern is that employers are not always utilizing these life insurance tools and plans. The benefits managers are often focused on health and retirement. These two needs seem to be “entitlements” in a benefits package, while life insurance is a “nice to have.” This shortsighted attitude ignores that people depend on others for financial assistance.
Children depend on parents, and sometimes one spouse depends on the other for income. Compared with a health issue, a lost job or any other disruption in pay, death is a permanent cessation of income.
As long as families and businesses are dependent on the financial successes of others, life insurance is not just a luxury. It is a necessity, and one that employers should either offer or provide to their employees.