| NEW YORK, Sept 29
NEW YORK, Sept 29 As benefits season kicks off,
you may be focused on the changes to your health plan. But be
sure to pay careful attention to your life insurance options
when you fill out your annual enrollment forms.
That is because the typical U.S. company usually only offers
one- to three-times salary as a life insurance benefit at no
cost to workers, and it ends when you leave the job.
Still, this is all many people have. Only 70 percent of
Americans - some 87 million households - have any kind of life
insurance coverage, according to the new 2016 survey by life
insurance research group LIMRA. Nearly half of those surveyed by
LIMRA have only group policies, with an average coverage of
$236,000, or 2.6-times income replacement.
"If you're 26, with no student debt, on your own with no
family, then maybe one-times your salary is sufficient," says
Anita Potter, assistant vice president for LIMRA.
The industry recommendation from LIMRA is to have more than
double that, and some financial experts recommend even more.
"The old rule of thumb used to be 10-times income, but with
today's markets and lower interest rates, you need closer to 15-
or 20-times," says Marvin Feldman, president and CEO of Life
Happens, a non-profit group formed by seven insurance producer
The first place to level up may be at your own company.
About 70 percent of workplaces offer additional optional
coverage, and about 40 percent of employees take them up on it,
The key benefit of increasing your coverage this way: Group
benefits usually require little underwriting, which means no
doctor notes or health restrictions. You may also be able to
take that additional coverage with you when you change jobs,
Buying company coverage is "a nice way to get the
conversation started," says Sean Scaturro, a financial adviser
for USAA, the financial services company that caters to a
Scaturro uses the acronym "LIFE" to remember what
individuals need to consider: liabilities, income for survivors,
final expenses and education costs for survivors. Online
calculators are available to do the math for you, like the one
at Life Happens (lifehap.pn/1icrq0n).
Financial advisers or life insurance brokers can help walk
you through the various policy types.
Most people would do best with simple term life policies,
Scaturro says. These charge a low monthly premium, which could
be under $50 a month for a person under 55, for a fixed period
like 10 or 20 years. Term policies do not pay out any benefits
if the person does not die.
There are also more complicated policy types that offer
investment options and that you can take loans against, but many
advisers warn against them for basic life insurance needs.
"We need to stop thinking of life insurance as a Swiss army
knife," Scaturro says. "It was designed to provide cash for
loved ones if you die. Those that flirt with investment become
The biggest hurdle of getting people to have adequate
coverage is that workplace insurance provides "a false sense of
security," Feldman says.
People typically need to be scared into it or tugged by the
heartstrings. It often takes a bad experience with a family
member or close friend to motivate someone to get serious about
life insurance. Or the story of somebody famous.
This year's face of life insurance meets both of those
requirements. Race car driver Danica Patrick, who is a
spokeswoman for Life Happens, obviously needs to protect herself
because of her risky job, but she also comes from a family that
was nearly destitute in the past because of the untimely deaths
of both of her grandfathers, neither of whom had life insurance.
Her parents drilled into her the importance of proper coverage.
"I hope people hear my story and are reminded of just how
random and unpredictable life can be," Patrick said in an
emailed statement to Reuters. "Bad things can happen. That's
just life. But life insurance is an easy and smart way to lessen
the impact and protect loved ones."
(Editing by Lauren Young and Leslie Adler)