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Americans say life insurance benefits worth a sacrifice

By Maryalene LaPonsie on November 24th, 2013

Life insurance becomes more of a priority once individuals realize the additional benefits offered by many policies. That appears to be one finding of the Allianz Life 2013 Life Insurance Perspectives Study.

The study asked respondents about why they buy life insurance and whether they were willing to make sacrifices to buy policies with additional benefits attached. In addition to reporting customer perspectives, its findings indicate life insurance companies could do a better job of educating consumers regarding plan features.

Death benefit top reason consumers buy coverage

It probably isn't surprising a policy's death benefit remains the number one reason individuals buy life insurance. According to Allianz Life, 80 percent say this benefit is the primary purpose for buying term life, whole life or universal life coverage.

In addition, many respondents named the following as their top reasons to need a policy:

  • Replace lost income: 35 percent
  • Pay for final funeral/probate expenses: 28 percent
  • Pay off mortgage/debt: 18 percent

Only four percent of those polled said access to cash for college funding, healthcare emergencies or supplemental retirement income was a top reason for having life insurance.

Americans willing to sacrifice for access to cash

While few said access to cash was a top reason for buying coverage, the low percentage may indicate many consumers are simply unaware life insurance can come with this benefit. Once respondents were made aware of living benefits and cash value benefits, 64 percent said they would be willing to make a sacrifice to buy these policies.

The sacrifices individuals would be willing to make include the following:

  • Eat out less often: 25 percent
  • Drive a less expensive car: 12 percent
  • Give up morning coffee: 12 percent
  • Forgo a cell phone upgrade: 8 percent
  • Skip a planned vacation: 5 percent

Of the additional benefits presented in the Allianz Life survey, money in the event of a chronic illness was named most valuable by 62 percent of respondents. Living benefits allow a portion of the death benefit to be distributed early in the event of a terminal diagnosis or should an individual need long term care. Some policies come standard with living benefits while others offer it as an optional rider.

Half of those surveyed liked the idea of having extra cash available to supplement their retirement money and more than one in five said funds to pay for college was their favorite additional benefit of life insurance policies.

Both these goals can be achieved with any whole life policy. Whole life and many universal life plans have a guaranteed cash value that can used for any reason, including as an income supplement or to pay for college tuition.

In a written statement, Deb Repya, Allianz Life Vice President of Advanced Markets, summed up the findings by noting, "Several options are available today beyond traditional term and permanent policies so it's important that the industry continues to spread the word about the versatility of modern life insurance."

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