Are Your Life Insurance Clients Underinsured?

Next month signals not only the beginning of fall, but also the start of Life Insurance Awareness Month (LIAM). Every year during the month of September, Life Happens, a nonprofit organization dedicated to helping consumers take personal financial responsibility through the ownership of life insurance and related products, raises awareness regarding the importance of life insurance.

With 102 million adults living with an uninsured or underinsured life insurance need gap, you likely have clients in your book of business that require more life insurance coverage. During LIAM, the Life Happens website provides resources and information you can use to better educate prospects and insureds on the importance of reviewing life insurance policies to identify possible gaps in coverage. 

Most Americans that have life insurance through work don’t have enough coverage

According to the Life Insurance Marketing and Research Association, of the 59% of Americans who have life insurance, more than half don’t have enough coverage. The main reason is that most households have coverage through a group life insurance plan — policies that are typically offered through the workplace.

The problem with group policies is that they are designed to accommodate all employees and often fall short of meeting their individual needs. LIMRA research shows that an estimated 9 million households with group life benefits fall short of having enough life insurance coverage, with an average coverage gap of at least $225,000.

At best, most group life policies will provide death benefits equal to or double the employee’s annual salary. For clients with a family, a mortgage and other significant debts, this likely isn’t going to be enough. In general, it is recommended that couples, especially those with children or who are carrying large debts, should have anywhere from five to 12 times their annual salary in coverage.

Group policies often have fewer options

While an employer’s group life insurance policy is nice to have, in many cases, it shouldn’t be the sole source of protection. Because group plans are established by the employer, employees may not always have the option to increase their coverage as their lives and financial situations change — such as with the adoption or birth of a child, marriage, a change in income, or purchase of a new home.

Another challenge with having life insurance through the workplace is that some policies may be final expense or burial insurance policies with a death benefit of, say, $10,000 to $15,000. And while this may be offered as a no-cost or a low-cost benefit, it clearly falls short of what most American families need to maintain their current standard of living should the primary wage earner pass away. In addition, most group policies aren’t portable. In the event the employee leaves his or her job, coverage under the employer-sponsored group plan will typically end.


The fact is, life insurance isn’t a one-size-fits-all product. By relying exclusively on group coverage through the workplace, employees are missing the opportunity to personalize their coverage based on their specific needs. During LIAM, take the time to strategize on how you can better educate your clients on the potential shortcomings of group life insurance policies. A good place to start is by scheduling a life insurance needs assessment to determine whether your clients may need to supplement their coverage with a stand-alone life insurance policy.

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