4 in 10 Hispanics plan to use their cash value life insurance to help supplement retirement savingsThe 2023 Insurance Barometer Study, conducted by LIMRA and Life Happens, revealed Hispanic adults generally seem to be more financially stressed in their day-to-day lives.
According to the 2023 Insurance Barometer Study, half of Hispanic adults (50%) say they are very worried about having enough money for retirement, which is six points According to the 2023 Insurance Barometer Study, half of Hispanic adults (50%) say they are very worried about having enough money for retirement, which is six points higher than the response from the general population.
The study, conducted by LIMRA and Life Happens, revealed Hispanic adults generally seem to be more financially stressed in their day-to-day lives. Hispanics are more likely to worry than other market segments about their job security, paying their monthly bills (including rent/mortgage and credit card debt), managing financially should they become disabled and unable to work, or paying medical bills should they become sick. These heightened financial concerns seem to undermine their likelihood to take the steps to protect their loved ones’ and their own financial future.
Saving For Retirement
Hispanics are less likely than the general population to contribute to employer-sponsored defined contribution and defined benefit plan accounts and less likely to have individual retirement accounts (IRAs). Today, these are the financial vehicles that workers typically use to save and fund their future retirement.
Just 34% of Hispanics believe they are saving enough or have saved enough for retirement, six points lower than the national average. Hispanics are also less likely to believe they have done enough planning for retirement. Lack of saving and planning has a definite impact on people’s retirement confidence. Other LIMRA research shows people who save and plan for retirement are more likely (by at least 10 points) to feel confident in their retirement financial security than those who don’t.
Owning Life Insurance
Among racial and ethnic groups, Hispanics are least likely to say they own life insurance. Just 45% of Hispanic adults report owning life insurance, seven points below the national average. But Hispanics recognize the value of it. Nearly half (49%) say they need (or need more) life insurance, which amounts to 23 million adults — not an insignificant market opportunity.
For those Hispanics who have life insurance, a significantly larger proportion rely on individual coverage than coverage they get through their employer (59% versus 24%). Less than 1 in 5 (17%) report having both individual and group coverage.
While the top three reasons Hispanics give for owning coverage align with the reasons given by all consumers — cover final expenses, pay off mortgage and leave an inheritance — Hispanics are more likely than any other group to say they plan to use their life insurance to supplement their retirement income. With this in mind, it makes sense that Hispanics who own individual life insurance are more likely than the general population to own permanent life insurance (68% versus 65%).
Relying On Permanent Life Insurance To Support Retirement Security
Hispanic adults are less likely to feel they have saved and planned enough for retirement. Perhaps that is why they plan to rely on their permanent life insurance to make up the difference. Research shows 42% of Hispanics who own permanent life insurance say the cash value will fund at least half of their retirement. This is 12 points higher than other market segments.
Understanding what motivates Hispanics to buy life insurance and how they plan to use it will help the industry engage and educate this underserved market. Despite the higher value and importance this group places on life insurance, their misperceptions about cost — 75% overestimate the cost of coverage — may be an obstacle. This is a group that consistently reports higher levels of day-to-day financial concerns. Insurance companies and financial professionals should work with their Hispanic prospects and clients to explain the many ways life insurance can support financial security and help them to build a financial plan that includes life insurance. Having this knowledge can help protect their families’ future financial security as well as their own.