September is life insurance awareness month. Each year, the Life Insurance Marketing and Research Association (LIMRA) publishes a fact sheet of data regarding people’s awareness of life insurance and their options. It turns out, many are woefully unaware.
Even after years of LIMRA and other organizations delivering education, only 29% of consumers believe themselves to be knowledgeable about life insurance.In fact, their research shows that nearly 100 million American adults believe they need more life insurance. Some may have already decided it’s too expensive, without truly examining the cost. According to additional LIMRA and Life Happens research, young adults overestimate the cost of life insurance by a factor of 10 to 12 times.
A lot of people might be able to get the life insurance they believe they need and can afford if only they took the time to explore their options.September is a great month to reevaluate your insurance needs and options. Even those who have some life insurance coverage through their employer, or who took the initiative to add life insurance into their financial plan, should reexamine their coverage as goals and needs change over time. For example, identifying future income replacement for the family is crucial for determining insurance needs. Along with an annual review, significant life events can prompt you to reassess whether your coverage remains adequate.
Here are some of the life events most likely to trigger the need for a change:
- Adding (or removing) a member of the family – When a child is born, a college savings fund is often started, with a goal to contribute to it annually for 18 years. Life insurance can aid in reaching that goal. Plus, with child care costs continuing to rise, it is equally important to have sufficient funds to ensure your child's upbringing is not hindered by financial constraints over those first 18 years. On the other hand, in the tragic event that a family member passes, the amount of coverage needed may decrease.
- Buying a new home – The loss of a primary or secondary income often changes whether or not mortgage obligations can be met. Life insurance can help prevent a move or at least delay it, so that decisions are not rushed and nothing is sold at fire-sale prices.
- Finding out that additional care will be needed for an individual with special needs – While there can be no substitute for a caregiver, there are ways to provide quality of life improvements for a child with special needs, and life insurance can help provide that. When combined with a special needs trust, it’s also possible to prevent state benefits from being lost along the way.
- Starting or taking over a family business – If you become a key player in the family business, you should also realize that you are part of what makes the asset valuable for the rest of the family. Key man insurance can provide the capital needed to sustain business operations while suitable replacement talent or a buyer is found.
- Funeral or celebration of life expenses – These expenses keep rising, so planning for adequate coverage during an annual review to look at current costs is helpful. Debating costs for memorial services while grieving is a difficult process. By providing for those costs separately, some of that anxiety can be avoided.
Also, the death benefit, or how much is paid out upon one’s passing, comes at varying premium costs. To fully substitute current income with life insurance, the usual recommendation is to purchase a death benefit that is 10-15 times your current income, which can also help offset future inflation risk. However, when determining coverage amounts, you should take a closer look at what you want to protect and what it would take to do so.
For any given death benefit, actuaries determine the premium cost based on a number of factors such as gender, age, tobacco use, health, profession, and length of policy. These factors are unique to each individual.For example, consider life expectancy rates. Women’s life expectancy is longer than men’s, and therefore their premium cost is typically less than men’s, given all the other variables being the same.
This isn’t just because there’s a longer timeframe in which the policy might be lapsed, it’s also because there are more months for premiums to be paid over the life of the policy (on average). Living five years longer would mean 60 additional payments. Thus, the total cost difference isn’t as much as it might appear when only reviewing the premium.
Similarly, during the first years of the COVID pandemic, life expectancy rates went down by a few years for both men and women, making insurance premiums more expensive. Now they are closer to where they were before the pandemic, so it’s possible that taking out a new policy based on current data would have a lower premium than a policy taken out at the height of the pandemic, even with the same death benefit. This would be especially true if other personal factors make someone less at risk, such as a drastic improvement in health.
Another option to consider when looking at life insurance is associated insurance and services. There may be things one wants to utilize before they pass, like investment options with a whole life policy that accrues cash value, or long-term care insurance.
Doesn’t Medicare cover healthcare in retirement? Why consider long-term care insurance?
Medicare will be an essential resource for retirement healthcare costs associated with aging, but it primarily focuses on acute care. Most of us have senior relatives who may have encountered chronic pain that Medicare may not cover.
There are also alternatives to consider for individuals struggling with self-care. These range from in-home assistance, which may be sufficient during the early stages of impairment, to admission to a nursing home for comprehensive supervision. A year in a private nursing home can easily cost $75,000 or more in many parts of the country.
Adding long-term care insurance can provide funds when someone can no longer live independently. This can be a meaningful gift not just for yourself, but also for anyone who takes on the important role of caregiver, by reducing their responsibility. Learn more about long-term care and its benefits on our website here.
Which insurance is best for me?
When you think about a whole life insurance policy, you may want to meet several goals at once. You might also consider purchasing a larger policy to cover future needs, since you can lock in a premium rate for your whole life. This can be a great solution for many people, but it lacks the flexibility that term life insurance can provide, where you buy policies for your specific goals until they are outgrown.
An Arvest Wealth Management client advisor can help you develop objectives, assess your resources, and identify which life insurance choices may be best for you and your family. Scheduling a meeting to review your existing plan is a simple yet powerful way to ensure it aligns with your current needs or to identify a need to develop a new plan from scratch.
This content has been prepared by The Merrill Anderson Company and is intended as a general guideline.
© 2025 M.A. Co. All rights reserved.
Arvest and its associates do not provide tax or legal advice. The information presented here is not intended as, and should not be considered, tax or legal advice. Consult your tax and legal advisors accordingly.
