Lack of Life Insurance Puts 77 Million Americans at Risk, SalaryShield Survey Finds

2008-09-24 04:34:01 -

www.salaryshield.com - SalaryShield Jon Newman, 804-788-1414 jnewman@hodgespart.com One in three Americans doesn't have life insurance, leaving an estimated 77 million Americans financially exposed, according to a new national survey released today. In the face of survey findings that revealed that 77 percent of adults believe that providing for their family after they are gone is important, more than one third are uninsured.

The survey, commissioned by Heritage Union, a pioneer in the life insurance market focused on meeting the income protection needs of American families, and conducted by IPSOS Public Affairs, a leading, global research company, found that 34 percent of respondents - split evenly between men and women - are uninsured. Of those who do have life insurance, one in five (22%) do not believe they have enough.

When asked why they lack life insurance, 43 percent of those surveyed said that coverage was too expensive, with 47 percent noting that the "uncertain economy" is restricting their capacity to purchase insurance. Another one in four respondents (24%) said that they did not think they needed it, and one in seven (14%) felt that shopping for life insurance was too complicated or too much of a hassle.

"There is clearly a disconnect between the overriding sentiment that we have an obligation to provide for our families after we are gone, and the capacity for many Americans to do so," said Phil Walker, CEO and co-founder of Richmond, Va.-based Heritage Union. "At Heritage Union, we set out to build products that meet the needs of Americans at a cost they can afford. Our goal is to make getting life insurance simple."

How long will it last?

For Americans who have coverage, many are overly optimistic about the length of time a life insurance benefit check would last. Fifty-four percent of Americans said that they thought a $250,000 lump sum payout would last at least four years, with almost half of those predicting it would last 10 years or more.

The average amount of life insurance coverage on insured husbands is $235,600 (Source: LIMRA International, Sept. 2007). If the entire lump sum payment is used to pay off larger debts - such as a mortgage, credit cards or funeral expenses - little money is left to pay for everyday living expenses - groceries, gas, utilities, clothes and the like - leaving the family exposed to hardship. (See the addendum at the end of this document for scenarios on determining how long typical lump sum payments will likely last.)

"Just what is an objective standard for determining how much the surviving family will need?" Walker said. "The reason that purchasing life insurance is so maddening is that consumers are asked three questions that are impossible to answer. First, how much do you expect to earn over your lifetime? Second, what are future economic conditions likely to be? And finally, when are you going to die? Unless you know the answers to all three of those questions, you are really just making an educated guess as to your family's needs."

According to Walker, compounding the problem is the fact that the average family is not adequately prepared to manage large lump-sum payouts. They fall victims to uninformed financial decisions or the so-called "lottery effect" - the propensity to make rash spending decisions under the false sense that the money will last much longer.

"In talking to customers about life insurance, we have found that many Americans are truly daunted at the prospect of having to manage a large lump-sum payout if something happened to the insured," Walker said. "Not only are many people often ill-prepared to make what can be complicated financial decisions, but invariably, the money does not last as long as they had planned for."

Introducing SalaryShield(R) income protection life insurance

In response to these realities, Heritage Union has launched an innovative life insurance product that can provide regular monthly payments in the same amount as the breadwinner's monthly paycheck. Called SalaryShield(R), this new kind of life insurance continues to pay the surviving family until the policyholder would have turned 65, allowing the family to continue to maintain the same quality of life and forego the onerous and complex task of managing a large lump-sum payout.

"That's one reason we have introduced SalaryShield life insurance plans," Walker said. "As the name implies, SalaryShield provides income protection to American families. Much like disability insurance, it keeps the paychecks coming on a regular basis in the event that the family's breadwinner is no longer around to provide for them. The need for income protection and the solution that SalaryShield plans offer have really resonated with the customers we've spoken with across the country."

SalaryShield income protection is not yet available in all states. For more information about SalaryShield plans, visit www.salaryshield.com.

Additional Survey Results

According to the survey, the most accurate barometer for determining whether or not someone is insured is household income. Only 38 percent of those with a household income of under $25,000 per year are insured, a figure that rises to 80 percent for those households earning more than $50,000 annually.

There are other demographic factors that indicate a greater likelihood for being insured. Almost four in five (78%) of college graduates are insured vs. just 55 percent for those with a high school diploma or less. People who reside in the western United States are insured far more infrequently than any other region of the country: 50 percent in the West vs. 69 percent in the South, East and Midwest.

When asked how much life insurance they thought was enough, respondents offered contrasting amounts. While 23 percent said they would need between $400,000 and $1 million, 22 percent thought that $11,001 to $100,000 would be sufficient. The median amount cited was $200,000.

When queried about how their surviving family would get by if they died, one quarter of those surveyed said that their spouse would go back to work; 24 percent said that they would be supported by family and friends; and 11 percent believed the government would provide for them.

The survey often unveiled some paradoxical findings: those who have life insurance believe that they will live longer than those without it. When asked to predict how long they will live, the 65 percent of Americans who have life insurance believe they will reach almost 82 years on average, while the 34 percent who are uninsured are less sanguine about their longevity, predicting their demise some five years earlier on average.

Overall, 53 percent of survey respondents thought they would outlive the country's average mortality rate, which is just shy of 78 years. One in every 14 of those surveyed said they expected to reach 100.

Survey Methodology

A nationally representative sample of 1,000 randomly selected adults aged 18 and over residing in the U.S. was interviewed by telephone via IPSOS' U.S. Telephone Express omnibus on July 17-21, 2008. With a sample of this size, the results are considered accurate within +/-3.1 percentage points, 19 times out of 20, of what they would have been had the entire adult population in the U.S. been polled. The margin of error will be larger within regions and for other sub-groupings of the survey population. These data were weighted to ensure the sample's regional and age/gender composition reflects that of the actual U.S. population according to data from the U.S. Census Bureau.

About Heritage Union

Founded in 2005 by financial services executives who experienced first-hand the intrusive, overly complex and frustrating nature of obtaining life insurance, the Richmond, Va.-based Heritage Union family of companies designs life insurance products aimed specifically at helping middle class American families protect their income in the face of premature death. Licensed, well-capitalized and staffed by industry professionals who recognize that shopping for life insurance should not require a crystal ball or MBA, Heritage Union is transforming an industry with new, innovative income-protection products under the SalaryShield brand that are easy to buy, affordable and understandable. For more information on the company, visit www.heritageunion.com. -0- Addendum - Determining How Long Average Lump Sum Payments Last Scenario A - assumes beneficiary pays off remaining mortgage (Facts from Life Insurance Awareness Month, LIMRA Avg Insurance Policy $235,600 Int'l, Sep 2007) (Federal Reserve Bank of Avg Mortgage Balance $181,225 Kansas City, 2008) Avg Credit Card Debt $8,585 (Federal Reserve Board, 2008) (Nat'l Funeral Directors of Average Funeral Cost $6,500 America, 2004) Money Leftover $39,290 (U.S. Census Bureau, 2008 Median Household Income $50,223 Current Population Survey) # Months of Income 9.4 months Scenario B - assumes beneficiary continues to make monthly mortgage payments (Facts from Life Insurance Awareness Month, LIMRA Avg Insurance Policy $235,600 Int'l, Sep 2007) Avg Credit Card Debt $8,585 (Federal Reserve Board, 2008) (Nat'l Funeral Directors of Average Funeral Cost $6,500 America) Money Leftover $220,515 (U.S. Census Bureau, 2008 Median Household Income $50,223 Current Population Survey) # Years of Income 4.4 years

Uncertain economy contributing to ranks of uninsured

Announcement of New Life Insurance Product Coincides with Release
of National Survey Results