Life insurance is often overlooked when it comes to protecting our loved ones, but it is one of the most important investments we can make.
Unfortunately, there are some very sad facts about life insurance that many of us don’t know.
These seven facts about life insurance are a sobering reminder of the importance of having a life insurance policy in place.
Read on to learn more about the sometimes heartbreaking reality of life insurance.
1) The average person is woefully underinsured
When it comes to life insurance, most people don’t have nearly enough coverage.
According to the 2019 Insurance Barometer Study from Life Happens and LIMRA, a whopping 61% of people have less than $100,000 in life insurance coverage.
That means that if anything were to happen to them, their families would be left without enough funds to pay for things like funeral expenses and other financial needs.
On top of this, only 46% of those surveyed had any life insurance at all.
That’s a staggering statistic given the importance of life insurance and the security it provides in case something happens to the policyholder.
So why is there such a large gap between the amount of coverage people need and what they actually have?
One reason could be that many people simply don’t understand the importance of having enough coverage. Another could be that they don’t know how much coverage they should get.
Whatever the reason, it’s important that everyone takes the time to assess their needs and purchase an appropriate amount of life insurance.
2) Most people have no life insurance at all
It’s a startling fact that most people have no life insurance at all. The majority of adults in the United States don’t have a single policy, with only 44% of adults owning life insurance of any kind.
This can be attributed to a few things: the cost, the perceived hassle and complexity, and an ignorance about the importance of life insurance for financial security.
Not having life insurance can have serious implications for your family in the event of your death. Without it, your family will likely have to face steep costs for final expenses such as funeral arrangements.
The absence of life insurance can also be financially devastating for families that rely on the income of the insured person.
It’s important to remember that life insurance isn’t just for the wealthy—it’s actually much more affordable than you might think.
Most policies are structured so that you pay a small monthly fee over a number of years, making them accessible even to those with a tighter budget.
If you don’t have life insurance yet, now is the time to consider it—for the sake of your loved ones.
3) The majority of life insurance policies are sold by agents who are unlicensed
This is one of the sad facts about life insurance that many people don’t know. Unlicensed agents are not bound by state regulations, which means they can often sell policies without any real knowledge or expertise.
This can lead to policies that are sold without full disclosure and can leave the policyholder with inadequate coverage.
In addition, unlicensed agents are able to charge higher fees, resulting in higher costs for customers.
The extra cost can add up quickly, especially when combined with other fees, such as medical exams, that must be paid to obtain a policy.
Unlicensed agents also tend to target people who don’t know a lot about insurance and are more likely to purchase policies without shopping around.
This can be especially damaging to those who don’t have the time or expertise to properly evaluate the policy they are purchasing.
Ultimately, it’s important to make sure you are working with a licensed insurance agent when purchasing a life insurance policy.
Not only will they be able to provide you with accurate information and proper disclosure, but they will also be held accountable for their advice by the state insurance board.
4) The industry is rife with fraud and abuse
Unfortunately, fraud and abuse have become all too common in the life insurance industry.
From agents selling fraudulent policies to clients to companies using deceptive practices to take advantage of unsuspecting customers, it’s becoming increasingly difficult to trust any life insurance provider.
One of the most common forms of life insurance fraud is when an agent or company sells a policy that does not meet the client’s needs.
This often involves the agent misrepresenting the coverage, leaving out important details, or making false promises about the policy’s benefits.
In other cases, agents may charge excessive fees for services or use high-pressure sales tactics to get customers to sign up for policies they don’t need or can’t afford.
Companies may also use deceptive advertising and marketing practices to lure customers into buying policies with hidden fees and exorbitant premiums.
The prevalence of fraud and abuse in the life insurance industry has become so widespread that many consumers feel hesitant to purchase a policy.
The best way to protect yourself is to carefully research different providers and always read the fine print before signing any documents.
5) Most policies are sold to people who don’t need them
Unfortunately, many life insurance policies are sold to people who don’t actually need them.
This could be because the agent wants to increase their commission or because the customer isn’t fully informed about their own financial situation.
In some cases, the customer may be convinced that they need more coverage than they actually do.
The sad truth is that many people purchase life insurance policies even though they don’t have enough money to pay for them, or they don’t have anyone who would financially benefit from the death benefit.
This can lead to policies that never get used and lapse without ever paying out a death benefit.
For these reasons, it’s important to make sure you understand your own finances and needs before purchasing any kind of life insurance policy.
Make sure you have adequate coverage and are purchasing the right type of policy for you and your family.
If you’re unsure, consult with a qualified professional who can help you make an informed decision.
6) The vast majority of policies lapse without ever paying a death benefit
This sad fact is the result of poor consumer education and a lack of knowledge about the importance of life insurance.
Many people who purchase life insurance policies don’t realize that if they don’t pay the premiums, the policy will lapse and no death benefit will be paid out.
This is why it’s so important to educate yourself about life insurance before you purchase a policy.
It’s also important to understand that most policies are renewable for a limited amount of time. If you stop paying the premiums after the expiration date of the policy, you could lose your death benefit entirely.
So, make sure you know how long your policy is valid for and make sure you pay the premiums on time.
In addition to understanding when your policy expires, it’s also important to understand the differences between term and whole life insurance policies.
With term life insurance, if you outlive the term of the policy, no death benefit will be paid out.
On the other hand, whole life insurance offers a cash value component that can help ensure that you receive a death benefit even if you outlive the policy.
These facts are a sobering reminder that life insurance is more than just an expense – it’s an important protection against the unexpected.
Make sure you have the right coverage for your needs and always make sure to keep up with your premium payments so that your loved ones will receive a death benefit when the time comes.
Q: What are some sad facts about life insurance?
A: Some sad facts about life insurance include the high rate of policy lapses, the fact that many policies are underinsured, and the reality that some people may be denied coverage due to health issues.
Q: Why do so many life insurance policies lapse?
A: There are a few reasons why life insurance policies may lapse. One common reason is that policyholders may have difficulty keeping up with premium payments. Additionally, some policyholders may forget that they have life insurance policies or may simply choose to cancel them.
Q: What does it mean for a life insurance policy to be underinsured?
A: When a life insurance policy is underinsured, it means that the policyholder has not purchased enough coverage to adequately protect their loved ones in the event of their death. This can be a sad fact because it means that their beneficiaries may not receive enough financial support.
Q: Why do some people get denied life insurance coverage?
A: Some people may be denied life insurance coverage due to pre-existing health conditions, such as cancer or heart disease. Additionally, older individuals or those with risky occupations may also be denied coverage.
Q: How can I make sure that my life insurance policy doesn’t lapse or become underinsured?
A: To prevent a life insurance policy from lapsing, it’s important to stay on top of premium payments and keep track of policy details. To ensure that a policy is adequately funded, policyholders should periodically review their coverage needs and adjust their policies accordingly.
Q: What should I do if I’ve been denied life insurance coverage?
A: If you’ve been denied life insurance coverage, it may be helpful to work with an insurance agent or broker who can help you explore your options. Additionally, you may want to consider applying for coverage with a different insurer or exploring alternative types of insurance, such as a guaranteed issue policy.