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

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

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

Nearly two-thirds of employers offer group life insurance coverage of only two times annual salary or less, compared to conservative industry guidelines that suggest persons should have enough life insurance to replace at least five to seven times their annual salary.

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

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

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

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

"The foundation of a smart financial plan often starts with an appropriate level of life insurance. Creating a 'Financial Wellness' approach to your life insurance plan can change a common employee perception that life insurance is just for 'final expenses,' rather than its true purpose: financial protection for dependents" the authors write. "A consistent reminder about the value of life insurance and the affordable coverage available at work can help employees understand how to choose the coverage that's right for their needs, and update that coverage as their personal situation changes."

Other key survey findings include:

A majority of employers offering group life insurance still pay 100 percent of the premium; however, the share of employers paying the full cost has been trending downward. In 2019, 53 percent paid the entire cost of their employees' life insurance benefits compared 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 voluntary benefit, where the employee pays 100 percent of the premium.
Enrollment in voluntary life insurance plans has been trending up in the past three years. In 2019, employers report average participation of 38 percent in voluntary life insurance plans, with 27 percent experiencing an increase in participation since 2016.
On average, men are somewhat more likely than women to own life insurance (75 percent vs. 71 percent), but this gap has narrowed considerably in the past twenty years, with more women working and having access to group life insurance benefits.
Not surprisingly, ownership of life insurance is also highly correlated with age. Only 48 percent of younger millennials own any life insurance compared to 82 percent of baby boomers. More than 70 percent of millennials say they have other financial priorities, such as cost-of-living expenses and student debt. But they may be basing their decision on erroneous conclusions: 44 percent of millennials also believe that life insurance is at least five times more expensive than the actual cost.

"People tend to overestimate the cost of life insurance," the authors write. "Most don't realize that the average monthly premium is as affordable as other expenses, such as the cost of a daily latte."

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Life insurance: Not enough have it, and many don't have enough

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