Is Life Insurance Awareness Month highlighting a critical knowledge gap?
September is Life Insurance Awareness Month, and while it’s an opportunity to spotlight the importance of this financial tool, a recent survey indicates a significant knowledge gap among Americans.
Survey findings reveal that a staggering 82% of Americans over the age of 25 tend to overestimate the cost of life insurance.
In fact, most of them believe it’s at least three times more expensive than it is. The reality is that life insurance can cost less than $20 a month.
This cost primarily depends on factors like the type of policy, your age, gender, and health. This widespread misconception underscores the pressing need for improved understanding of life insurance.
Do Americans truly grasp what life insurance covers?
Beyond the cost misconception, the survey also highlights confusion regarding what life insurance covers.
A mere 51% of survey respondents believed that life insurance policies cover deaths resulting from illnesses, including the ongoing COVID-19 pandemic.
Furthermore, only 27% thought that a death occurring in another country would be covered by their life insurance policy.
There was also considerable uncertainty about who can be named as a beneficiary in a life insurance policy, with just 32% being aware that friends can be designated as beneficiaries, and only 18% recognizing that charities can also be named.
Additionally, the survey uncovered a widespread misunderstanding that factors such as income and the number of children can affect life insurance quotes when they do not.
This lack of clarity has the potential to lead individuals to make ill-informed decisions with far-reaching financial consequences.
That being said, a record number of Americans are planning to purchase life insurance this year. Americans place high value on life insurance.
Are Americans making costly mistakes when it comes to life insurance?
Americans are also often confused about the choice between term and whole life insurance.
28% of survey respondents believed that whole life insurance is cheaper than term life insurance, while 24% thought the two types of policies had the same cost.
Contrary to this misconception, term life insurance is typically more affordable.
This misperception has the potential to lead individuals to select more expensive policies than they need, which could have a substantial impact on their long-term financial security.
Life Insurance Awareness Month is an important reminder of the significance of life insurance. It also underscores the critical need for enhanced education on this topic.
A substantial number of Americans are overestimating the costs, underestimating the coverage, and making potentially costly errors in their insurance choices.
Given that life insurance plays an essential role in financial planning and protection, it’s imperative that individuals seek accurate information and guidance to make well-informed decisions.