Picture this: you have a mortgage, two children, child care expenses and plans for college educations. Or maybe your children are grown and moved out of the house, but you’re helping them financially and taking care of elderly parents.
If something were to happen to you, or to your spouse, would you have enough life insurance protection to cover all of your expenses? Typically, financial advisors recommend owning life insurance coverage of at least 7 to 10 times your annual income.1
The Amica Life Financial Peace of Mind Survey2, conducted earlier this year, shows that many Americans are underinsured, though they understand how important life insurance is for financial protection. We surveyed financial decision-makers in more than 2,500 U.S. households, ages 25 to 70, about life insurance topics.
The results may surprise you. While 84 percent of Americans believe that adequate life insurance is important for financial peace of mind, many age 25-70 are underinsured. On average, their coverage equals only two to three times their annual income. Yet 66 percent of Americans believe they have the right amount or more life insurance than they need.
To help you understand why having the right amount of life insurance is important, let’s take a look at the hypothetical stories of Tom and Jane, and Bill and Lisa.
Tom and Jane’s story
Tom and Jane, both 34, are married with two children, Toby and Sophia, ages 2 and 6. Tom makes $65,000 a year, and Jane makes $75,000. Between the two of them, they have mortgage debt of $200,000 and student loans of $30,000, plus a small amount of credit card debt.
Tom and Jane aren’t alone. Our survey found that 64 percent of Americans ages 25 to 49 have a household debt of more than $10,000, excluding their mortgage, and 39 percent have student loans.
Tom and Jane have term life insurance through their employer that covers one times their annual salary and they have individual term policies. They each have about $200,000 worth of term life insurance.
Given Tom and Jane’s mortgage, student loans and the average cost of raising a child to age 18 of $245,340, more coverage is recommended to help support their families. Each spouse’s policy could help with the mortgage, but one spouse would still be left with large expenses and debts to cover on their own without additional coverage.
Bill and Lisa’s story
Bill and Lisa are 59 and 60, and their two children, Mitch and Jill, are 24 and 30. They have mortgage debt of $40,000 and are paying $40,000 in college tuition for Mitch, who still lives at home. Lisa’s 80-year-old mother, Ann, also needs around $5,000 a year in extra care and financial support.
Bill and Lisa believe they no longer need coverage after their 20-year term policies expire next year, and haven’t looked into additional coverage. They don’t realize that their children and parents would face financial hardship without them. Plus, Bill and Lisa may need to stay in the workforce longer to support their family. Our survey found that 48 percent of Americans ages 50 to 64 believe they or their spouse will continue to work past age 65.
Looking at their current and future financial responsibilities Bill and Lisa, should consider additional coverage to help protect Lisa’s mother, their children, as well as each other as they prepare for their retirement years.
Amica Life is here for you
As you can see from our examples, life insurance needs are unique to each individual and should be addressed by identifying what the individual would like to help protect. Many Amica customers are realizing the benefits of calling Amica Life to discuss their coverage options and receive the personalized coverage they need. Give us a call at 844-753-5433 and one of our representatives would be happy to assist you and discuss your personalized coverage options.
1 The American Council of Life Insurers (ACLI), 2014
2 2015 Amica Life Financial Peace of Mind Survey
3 USDA Expenditures on Children by Families, 2013 report