On average, just 15 percent ofthose with only group life insurance have the recommended level ofcoverage, compared to 32 percent of those who own individualpolicies purchased outside the workplace.(Image:Shutterstock)

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Workers might have life insurance policies, but the coverage isoften not enough, according to Guardian Life's report, "Protecting Those We Love: The Role of LifeInsurance in Financial Wellness."

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Guardian Life surveyed 2,000 employees and 1,500 employeebenefits decision-makers, and found that while the vast majority ofworkers say it's important for a family's primary wage earner toown life insurance, more than 60 percent have either no lifeinsurance or less than industry-recommended coverage amounts.

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RElated: Americans aren't buying life insurance, butwhy?

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"Life insurance ownership in the U.S. has been trending lowerthe past 40 years, and the average coverage amount is declining aswell," the authors write. "In the 1990s, employer-based or grouplife insurance surpassed individual life insurance (purchasedoutside the workplace) as the primary distribution channel. Thiscontributed to lower coverage levels because group plans tend tooffer smaller face amounts compared to policies available outsidethe workplace."

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Nearly two-thirds of employers offer group life insurancecoverage of only two times annual salary or less, compared toconservative industry guidelines that suggest persons should haveenough life insurance to replace at least five to seven times theirannual salary.

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Moreover, a third of employers offer life insurance benefitsthat cover just one times an employee's annual salary. Another onein five offer a flat amount of coverage, typically either $10,000or $20,000.

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"Workers who own individual life insurance are twice as likelyto have recommended coverage levels compared to those with onlyemployer-sponsored coverage," the authors write. "Among workingadults with only group life insurance, one in four have coverageequal to one times their annual salary or less."

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On average, just 15 percent of those with only group lifeinsurance have the recommended level of coverage, compared to 32percent of those who own individual policies purchased outside theworkplace.

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Employers should help their workers "protect their family'sfinancial future" by addressing workforce life insurance coverage,according to the report.

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"The foundation of a smart financial plan often starts with anappropriate level of life insurance. Creating a 'FinancialWellness' approach to your life insurance plan can change a commonemployee perception that life insurance is just for 'finalexpenses,' rather than its true purpose: financial protection fordependents" the authors write. "A consistent reminder about thevalue of life insurance and the affordable coverage available atwork can help employees understand how to choose the coveragethat's right for their needs, and update that coverage as theirpersonal situation changes."

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Other key survey findings include:

  • A majority of employers offering group life insurance still pay100 percent of the premium; however, the share of employers payingthe full cost has been trending downward. In 2019, 53 percent paidthe entire cost of their employees' life insurance benefitscompared to 59 percent in 2014.
  • Smaller firms are less likely to offer life insurance benefits,but those that do are more likely to offer it as a voluntarybenefit, where the employee pays 100 percent of the premium.
  • Enrollment in voluntary life insurance plans has been trendingup in the past three years. In 2019, employers report averageparticipation of 38 percent in voluntary life insurance plans, with27 percent experiencing an increase in participation since2016.
  • On average, men are somewhat more likely than women to own lifeinsurance (75 percent vs. 71 percent), but this gap has narrowedconsiderably in the past twenty years, with more women working andhaving access to group life insurance benefits.
  • Not surprisingly, ownership of life insurance is also highlycorrelated with age. Only 48 percent of younger millennials own anylife insurance compared to 82 percent of baby boomers. More than 70percent of millennials say they have other financial priorities,such as cost-of-living expenses and student debt. But they may bebasing their decision on erroneous conclusions: 44 percent ofmillennials also believe that life insurance is at least five timesmore expensive than the actual cost.

"People tend to overestimate the cost of life insurance," theauthors write. "Most don't realize that the average monthly premiumis as affordable as other expenses, such as the cost of a dailylatte."

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Katie Kuehner-Hebert

Katie Kuehner-Hebert is a freelance writer based in Running Springs, Calif. She has more than three decades of journalism experience, with particular expertise in employee benefits and other human resource topics.