Poll: Life insurance is a valuable but misunderstood financial product

By Maryalene LaPonsie on September 19th, 2012

Two-thirds of Americans report feeling secure by owning health, auto and life insurance, according to a recent poll by Harris Interactive for Northwestern Mutual.

However, the survey shows, some consumers may not fully appreciate all the benefits that come with life insurance.

Using life insurance to reach financial goals

"Individuals are increasingly looking at their long-term financial situation as one part building savings and assets, and one part protecting those savings and assets," David Simbro, Northwestern Mutual senior vice president, said in a statement. "The interesting point about life insurance, in particular, is that it stands alone in its flexibility to both address critical risks and help meet long-term financial goals."

Permanent life insurance, such as whole life and universal life, features a savings component known as "cash value," which grows over time on a tax-deferred basis. Policyholders can borrow from the cash value account or surrender the policy for the cash value.

The survey also revealed confusion about how much life insurance to buy. A third of respondents said they weren't certain which expenses their policy should cover, and relatively few respondents considered education and child care when determining how much term life or whole life coverage to purchase. Only 15 percent and 11 percent, respectively, reported considering these factors.

In addition, only 6 percent of respondents said they considered funding an inheritance or leaving a bequest to a favorite charity or non-profit with their life insurance policy.

September is Life Insurance Awareness Month

The publication of the Northwestern Mutual poll results coincides with the designation of September as Life Insurance Awareness Month.

Coordinated by the non-profit Life and Health Insurance Foundation for Education, also known as the LIFE Foundation, Life Insurance Awareness Month was created to remind consumers of the importance of maintaining adequate coverage.

Thirty percent of American households have no life insurance coverage, according to LIMRA, a research group that tracks the industry. To address the number of families lacking coverage, the foundation teams up with more than 100 life insurance companies and industry groups each year to promote the benefits of term life, whole life and universal life policies.

Maryalene LaPonsie
Maryalene LaPonsie has been writing professionally for more than a decade on topics including education, insurance and personal finance. She holds a Bachelor's Degree in Political Science from Western Michigan University.

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