Life Insurance: Help Employees Match Policy Features with Personal Expectations

During open enrollment season, remind employees to learn the details of their life insurance policy

Stephen Miller, CEBS By Stephen Miller, CEBS September 12, 2011

While four in five employees believe their life insurance coverage is adequate, 45 percent of working women and 28 percent of working men with life insurance have not evaluated their needs since obtaining their first policy, potentially leaving themselves and their families financially vulnerable in the event of a premature death, according to MetLife’s 2011 Insurance Literacy Study.

The survey sample consisted of employed U.S. adults who have life insurance, and was conducted in June 2011.

Working women with life insurance are nearly twice as likely as men (21 percent vs. 12 percent) to acknowledge they don’t know how much coverage they have and are more likely to underestimate how much coverage might be needed. While a good starting place for life insurance coverage is typically outstanding debt plus five years of salary, 54 percent of women and 47 percent of men believe coverage equal to outstanding debt and only three years of salary or less will be adequate.

Gender Expectations

Men and women have different desires for what they want their insurance policies to cover. Nearly three-quarters (73 percent) of married men say their number-one expectation for their life insurance coverage is to pay for future living expenses for their spouse, compared to 47 percent of married women. For married women, the number-one expectation is to cover their final expenses (69 percent vs. 55 percent of married men). However, both married men and women express nearly identical levels of interest in protecting the financial futures of their children.

“There’s a significant difference between having enough coverage simply to pay for final expenses and also having enough coverage to meet the ongoing needs of a family with children,” said Todd Katz, executive vice president, U.S. business at MetLife. Especially during open enrollment season, employees should be reminded to “take the time to learn the details of their life insurance policy so that their desires for their family’s financial security can be matched with the most appropriate features and coverage levels. They should also take the time now to make sure beneficiary information is up-to-date.”

Policy Features to Match Needs

The study found that more than one-fourth of those interviewed are unfamiliar with the basic features of their own life insurance policies. For example, nearly one-quarter (24 percent) of employees who say they have term life insurance believe that this coverage offers financial protection for an unlimited amount of time. In fact, term insurance often offers financial protection for a defined time period such as 10, 15 or 20 years, or if provided through an employer-maintained group policy, for the duration of employment. At the end of these time periods, the term coverage typically may be continued, but usually with much higher premiums.

Employees may also not be leveraging life insurance as effectively as they could to meet their needs. Approximately one-third of employees with coverage do not realize that life insurance, in addition to a death benefit, can be a strategic method to supplement retirement benefits and aid in estate planning.

Katz added, “As a first step, people should familiarize themselves with their employer’s life insurance benefit. There may be ‘living benefits’ available such as will preparation or powers of attorney in addition to beneficiary assistance with estate resolution. However, they shouldn't assume that what you have at work is enough. Encourage employees to take time to fully understand their needs and supplement their workplace coverage as needed. Getting the right amount of insurance coverage is less expensive and less complicated than many think. Making use of coverage calculators and trusted advisors can help.”

Related SHRM Articles:

At Open Enrollment, Deciding How Much Life Insurance Is Enough, SHRM Online Benefits Discipline, September 2016

Young Workers Undervalue Life Insurance as a Benefit, SHRM Online Benefits Discipline, December 2010

Life Insurance Coverage Falls to 50-Year Low; Gender Gap Seen, SHRM Online Benefits Discipline, September 2010



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