More Than 90% of Americans Don’t Update Life Insurance After Major Life Changes — Here’s Why You Should
Written by
Vance Cariaga
Edited by
Zuri Anderson
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Life insurance plays a key role in long-term financial planning, but many customers don’t have much knowledge of how it actually works.
An estimated 60% of Americans have some sort of life insurance policy, according to industry data cited by The Zebra. About one-third believe they are underinsured, and more than half think the cost of a term life insurance policy is triple its actual cost.
Confusion over life insurance has contributed to “significant knowledge gaps,” according to a new survey of 1,009 Americans from Western & Southern Financial Group. It found that roughly one-quarter (26%) of policyholders are unsure if their life insurance would adequately cover their dependents’ education or debt. About one-fifth of policyholders and non-holders have confused life insurance with health insurance or retirement policies.
The study also revealed more jarring information about life insurance holders in the U.S. GOBankingRates breaks down the study and explains why should you update your policy — especially after major life changes. Plus find out how much life insurance you should have.
Life Insurance Policyholders Aren’t Updating After Major Life Events
Here are some other highlights from the Western & Southern survey:
- Only 26% of life insurance policyholders regularly consult their insurer or financial advisor about their policy details. Another 40% rarely or never review their policies.
- More than 90% of policyholders did not update their life insurance after major life changes, such as starting a business or taking on new debt.
That last statistic is particularly worrying to life insurance experts because of the negative financial impact of not updating policies when needed.
For example, 29% of respondents to the Western & Southern survey said they lost a life insurance policy after changing jobs or retiring, presumably because the policy was provided by their employer. In these situations, nearly one-quarter (23%) had to tap into personal savings to acquire life insurance, while 16% bought temporary or short-term policies.
As New York Life noted in a blog, numerous life events can impact your life insurance needs. Some are “relatively small” — such as like getting a salary increase or moving to a more expensive city. But others can have a profound impact on your life and finances, like becoming a parent or losing a loved one.
Major Life Events Affecting Insurance Needs
Here are eight major life events that can have a significant impact on your life insurance needs, according to New York Life — which means it’s a good time to update your coverage:
- Getting married
- Buying a home
- Having children
- Paying for your kids’ college
- Starting a business
- Caring for aging parents
- Having grandchildren
- Retiring
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