Life Insurance 2016

Preparing for the Unexpected

The all important ‘financial well-being conversation’ all couple’s should have

By Stephen Pontecorvo

Mr. Pontecorvo is senior vice president, MetLife Group Life Products. Visit metlife.com

By now, the new year is in high-gear, which means many people are zealously committed to eating healthier, playing less with their smartphones and exercising more frequently.

Not surprisingly, most resolutions are made to quit bad habits – but they can also be dedicated to adopting good ones. For those who are married or partnered, communicating about financial well-being and planning should be near the top of the resolutions list.

Discussions about finances can span many different topics, including saving for retirement, making a plan to pay for a child’s college education or simply ensuring there are enough funds to pay the monthly bills.

But couples dedicated to financial security must be open to having harder conversations that tackle more than how to balance the household budget and manage savings accounts. One difficult discussion that spouses and partners often put off until it’s too late is how to financially protect their loved ones in the case of the unexpected death of one of the partners.

Surviving Spouses: A new vulnerability

According to the U.S. Census Bureau, the median age for becoming widowed is about 60 years old, indicating that the death of a spouse or partner does not exclusively affect older couples – fully half of the newly widowed are 60 or under. MetLife sponsored the 2015 Study of the Financial Impact of Premature Death to examine the monetary fall-out that occurs in the aftermath of this loss. The results demonstrate why it is critical in today’s economic environment for couples to jointly talk through how they can best prepare for the unexpected.

The study, which surveyed survivors who lost a spouse or partner that was under age 63 within the past seven years, revealed that changes in the post-recession economy have heightened the financial impact of this premature loss.

Specifically, it found that the financial consequences of premature death are greater and more immediate today than they were when the study was last conducted in 2009. Nearly one in three surviving spouses surveyed in 2015 reported they were not at all financially secure in the first year following their partner’s death, compared to 25 percent of surviving spouses surveyed in 2009.

Post-recession, surviving families continue to feel pressure well after the immediate aftermath; and, in total, just under half (49 percent) of families say they have completely or somewhat recovered financially from the death of a spouse or partner that occurred up to seven years ago. With the incomes of many surviving spouses being lower today than they were in 2009, families are also reporting significant changes to their lifestyles.

Lifestyle changes include having to move, reducing spending and/or borrowing money to pay for things such as medical expenses, credit card debt and the monthly mortgage.

Perhaps most alarmingly, even those surveyed who considered themselves relatively well-insured did not feel that their insurance benefits were enough to manage the financial fall-out of losing their spouse or partner. Only 68 percent of those with life insurance representing three times the income of their late spouse found the proceeds very helpful, down from 81 percent in 2009.

This statistic, combined with the fact that 41 percent of respondents misguidedly cite cost as the main reason for opting out of life insurance, clearly indicates one thing: It is now even more important for couples to have real conversations with each other. Moreover, now is the time for brokers and employers to provide education to employees about affordable life insurance options that can alleviate financial burdens in personally trying times.

The Benefits of Life Insurance

employers who make group life insurance available through their workplace have a competitive edge in attracting AND retaining employees

American workers look to their employers when they think about life insurance. This becomes clear when we look at group life insurance statistics: 71 percent of all life insurance proceeds come from group coverage today. Eighty percent of workers consider group life insurance coverage important – and 53% consider it very important. This suggests that employers who make group life insurance available through their workplace have a competitive edge in attracting AND retaining employees.

This is further underscored by MetLife’s 13th annual U.S. Employee Benefit Trends Study (EBTS), which found that 54 percent of employees who currently are not offered life insurance by their employer would like the option to buy life insurance coverage through work.

Today, according to EBTS, just 35 percent of workers receive fully employer-paid life insurance coverage, compared to 46 percent that did so in 2009. To maintain life insurance as a benefit at the worksite, many employers offer their employees optional/supplemental life insurance coverage as a voluntary benefit at competitive group rates. There is a clear industry shift toward this selling model.

Furthermore, surviving spouses and partners indicated a need for services such as will preparation and grief counseling through their group life insurance. According to the study, nearly one in five who did not have access to grief counseling would have used such services if they had had access, and a similar proportion wish they had more assistance with funeral arrangements.

Of special concern, as reported by survey respondents, is that only 26 percent of their spouses or partners had a will at the time of death. This suggests that there is considerable justification for employers to incorporate these services into their life insurance options, and highlights the unmet demand for coverage with value-added features. Fortunately, they are available in the marketplace in varying forms, and some carriers include these meaningful services at no extra cost.

Call to Take Action: The Importance of Improved Communication

Fundamentally, life insurance offers individuals, couples and families a set of options to, quite literally, insure against the destructive effects a premature death can have on family finance. Yet, it appears many couples are not having open and honest conversations about these options – making it increasingly difficult to prepare for the financial consequences of unexpected events.

While 85 percent were aware of the existence of at least some family assets at the time of their spouse or partner’s death, only 49 percent of surviving spouses or partners said they had been involved in selecting life insurance amounts.

Overall, this bleak statistic, coupled with significant demand for life insurance benefits, suggests there is an opportunity for brokers and employers to make a great impact by emphasizing the importance of straightforward communication about life insurance options among couples. And, by offering life insurance that includes services such as will preparation, the employer creates a “teaching moment” to help employees overcome the hurdles to discuss a much-needed will.

Talking about finances can be uncomfortable – especially in the context of helping spouses and partners plan for an unexpected death. And while nothing can truly prepare spouses or partners for this devastating scenario, employer-sponsored life insurance provides financial and emotional support in the aftermath of a premature death. With many options for employers, and the availability of add-ons that create even more value for employees and their families, employer-sponsored life insurance is truly a win/win. ◊