The Importance of Closing the Life Insurance Coverage Gap

Earlier this year, seven life insurance industry trade organizations joined together to launch the Help Protect our Families campaign. Leveraging their unique expertise and resources, they aim to raise awareness of the value of life insurance and help close the life insurance coverage gap.

Lincoln Financial proudly supports the campaign. Andy Bucklee, senior vice president and head of Life and Executive Benefits Distribution, answered a few questions on why this campaign is important to consumers.

According to LIMRA’s annual Insurance Barometer Study, just 52 percent of Americans report having life insurance coverage. Taking that a step further, 102 million people say they either need coverage or need more coverage.

Can you talk about the need to close that coverage gap and the role life insurance plays in families’ overall financial security?

Life insurance is a critical component of financial security and it should be the bedrock of a family’s broader financial plan. Recent LIMRA research shows that 42% of American families would face financial hardship within six months if their household’s wage-earner died unexpectedly. Life insurance can help families in those situations stay in their home, cover their everyday expenses, maintain their lifestyle and put children through college. With appropriate life insurance coverage, instead of families worrying about their finances during a tough time, they can focus on emotional healing.

Recent research shows a big drop in coverage based on household income. The cost of life insurance and competing financial priorities are cited as the top reasons for not owning life insurance, followed by confusion around how much or what to buy. What would you say to someone who feels they can’t afford to purchase life insurance?

My first question would be: can you afford not to? I understand that the variety of products and price points can make the purchase of life insurance daunting to someone who isn’t familiar with it or its benefits. However, that variety also means there may be a product and price that works for your situation. In fact, for healthier individuals, it’s possible to get Term coverage for less than you spend each month on your morning coffees. This is where financial professionals play such an important role.

Recent data from LIMRA and Life Happens show that 41% of Americans say they want to work with an agent/advisor to purchase life insurance and more than half of Millennials say they haven’t purchased life insurance because no one has approached them. There is a clear need for the knowledge and expertise that financial professionals bring to the table, so I would recommend that anyone who feels they can’t afford life insurance have a conversation with an agent and understand what options they really have.

Research from the Protect Your Family campaign indicates that Life Insurance is increasing in importance among the top financial concerns of consumers, which rank in order as: Health Expenses, Savings Goals, Life Insurance and Living Expenses. Why is that?

I think a big part of why we see consumers putting more emphasis on life insurance over the past year, has been the pandemic. As people have been faced with their own mortality, it’s brought the importance of life insurance into focus for many people. In fact, Lincoln research found more than a third of survey respondents said they think life insurance is more important to own now due to the pandemic, and a third said they have or are planning to purchase new or additional life insurance as a result of the pandemic.

One of the things important to remember about life insurance, is that it is the only financial planning tool that can help address all four of the above-mentioned financial concerns.

While most people think of life insurance for the death benefits, aiming to cover funeral expenses or replace lost income, some types of life insurance can also help families in other ways through ‘living benefits’ that can be used for holistic financial planning. These ‘living benefits’ can help families with needs such as retirement income, long-term care expenses, protecting a business and tax planning.

According to LIMRA’s annual Insurance Barometer Study, more than half of Millennials have no life insurance coverage and 43% are very concerned about leaving their dependents in a difficult financial situation or burdening others with burial/funeral expenses if they should die. How do you think these issues should be addressed?

This is another situation where a financial professional can add a lot of value. It’s never too early to own life insurance and it’s important for Millennials to understand their options. Also, they need to understand that life insurance isn’t a one and done purchase. It’s important for individuals to review their coverage annually. Circumstances change and the amount of coverage needed changes too.

The campaign research finds that people say they are significantly more likely to buy life insurance through automated/accelerated underwriting. Why is that?

The life insurance buying experience has historically been a long, paper driven, intrusive process. But that’s changing. Today it’s often possible to complete the process completely electronically, from submitting the application and answering underwriting questions online to having your policy delivered and signed electronically. For healthier individuals, it may also be possible to bypass having a medical examiner come to your home and skip the underwriting lab work. People may be surprised to find how much simpler and friendlier the process has become.

For more information about importance of Life Insurance and all that it can offer, visit the LIMRA Help Protect Our Families campaign resource center here.

Lincoln Financial Group is the marketing name for Lincoln National Corporation and its affiliates, including The Lincoln National Life Insurance Company, Fort Wayne, IN, and Lincoln Life & Annuity Company of New York, Syracuse, NY. Variable products distributed by broker-dealer/affiliate Lincoln Financial Distributors, Inc., Radnor, PA. Securities and investment advisory services offered through other affiliates. Affiliates are separately responsible for their own financial and contractual obligations. LCN-3542203-040921.