The purpose of Life Insurance Awareness Month is to educate consumers about the importance of life insurance and the role it plays in protecting a family’s financial future.
According to LIMRA, 30 million American households are underinsured, and another 30 million completely lack life insurance coverage. If a primary wage-earner dies unexpectedly, that could create real hardship for the family left behind.
So how do we help address this coverage gap? I believe it comes down to awareness and accessibility.
Today, the prospect of losing a loved one is more real than ever, as more than 4 million families have lost a member to COVID-19.
In fact, LIMRA research shows that 6 in 10 Americans said they have a heightened awareness of the importance of life insurance due to COVID-19. And 7 in 10 Americans agreed that the pandemic has been a wake-up call to re-evaluate their long-term financial goals.
Misconceptions about life insurance can discourage individuals and families from purchasing policies. Here are a few misconceptions – and realities – we regularly see.
Misconception: Coverage is too expensive.
Reality: Premiums vary greatly depending on the type of policy, length of coverage and benefit level. But with the help of a financial professional, individuals can sort through the options to find an affordable policy that’s right for them.
Misconception: Policy terms are too rigid.
Reality: Individuals can choose from a wide range of options to meet their needs based on their specific financial situations. For example, term policies enable consumers to choose their desired time horizon and amount of coverage, while other policy types, such as universal life, allow clients to determine the timing and amount of premiums.
Misconception: The application and approval process is complicated.
Reality: Applying for life insurance is much easier and more straightforward than it used to be. New technology often simplifies and shortens the process. In many cases, applications can be submitted online and some do not require a medical exam.
Misconception: The value of life insurance is limited to the death benefit.
Reality: Many permanent life policies, including indexed universal life, allow for cash value accumulation that can be used for various purposes – such as paying for college or a wedding or for an emergency loan. Some policies can also be used as a source for supplemental retirement income (with the appropriate structuring of loans and withdrawals) or to fund costs of care.
The work that life insurers are doing to digitize processes is important, because it will increase accessibility. This will make it easier and faster to put life insurance protection in place. The pandemic and the current environment have expedited certain progress and adaptation within the entire life insurance industry.
Technology enables the industry to streamline efficiencies by making backend processes faster and easier. This allows for a more simplified experience, which helps to improve consumer relationships, and ultimately, experience. With the use of technology continuing to accelerate, we will see even more changes on the horizon that will transform the insurance industry. If designed and used well, leveraging today’s technology tools to build and sustain personal relationships with consumers will provide a competitive edge and further help to close the protection gap.
The life insurance industry plays a vital role for families and individuals and, through education, consumers can better understand the value coverage can provide. And with September being Life Insurance Awareness Month, it serves as a time to help consumers understand the importance of life insurance and how it can protect a family’s financial future – helping them to become more aware so they can truly prepare.
Tim Heslin is president of U.S. life insurance, AIG Life & Retirement. He may be contacted at [email protected].
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