Death, serious illness, financial hardship, and reduction in standard of living - the life risks covered by insurance - are on the minds of Americans, more so than people in 10 other countries surveyed.
Death, serious illness, financial hardship, and reduction in standard of living - the life risks covered by insurance - are on the minds of Americans, more so than people in 10 other countries surveyed, according to a study by the global research firm, Gfk Group for AXA Equitable Insurance Company. The survey, titled The 2007 AXA Equitable Protection Report was developed by the global insurance company to improve its understanding of the issues, attitudes and behaviors surrounding life risks and protection coverage.
The survey revealed that 87 percent of married Americans (or those with life partners) have had a conversation about life risks with that person. However, a third of them discuss it merely in passing. Less than 50 percent of Americans surveyed have spoken to an insurance agent or broker about preparing for these risks.
Ken Gelman, Vice President and Director of Customer Insights for AXA Equitable Life Insurance Company said that the survey findings reveal that many Americans seem to be trapped in a "cycle of anxiety." Gelman went on to say, "Despite their concerns, Americans lag in acting to protect against the impact of such negative life events."
A Coverage Disconnect
A large percentage of Americans (63%) believe life insurance protects their loved ones and provides peace of mind. Yet, contradictorily, over one third have not purchased insurance coverage. Eighteen percent have chosen to have no coverage of any kind.
"Americans are thinking and talking frequently about life risks," commented Gelman on this disconnect, "but their desire for peace of mind does not always result in action to protect their partners and children. And yet, when given an opportunity to explain, almost half can't state reasons as to why they don't act."
Why the Lack of Action?
The reason most frequently cited by Americans for not purchasing life insurance is that it is a benefit provided through their employer. Americans are the most likely to be covered by employer-provided insurance and are less likely to purchase insurance products themselves, compared to their global counterparts.
By utilizing employer-sponsored plans, many Americans experience a serious gap of coverage. These group life insurance plans typically tie the coverage amount to a multiple of an employee's income. The average group coverage of all American households is $153,900. A calculation of existing coverage and needs, developed as part of the protection report, shows that, on average, Americans 25 to 65 years of age have an insurance gap of $180,000. Families with financially dependent children have the highest gap -- $371,000.
According to Gelman, many Americans have been lulled into a false sense of security despite the disparities in coverage. "This is true even for high net worth respondents. Our study reveals that those who feel confident about their insurance coverage are often the most unrealistic about their protection needs," he said.
Almost fifty percent of those with the greatest amount of coverage gap -- $755,000 -- describe themselves as "feeling well insured."
Other key findings from the U.S. respondents include:
- Women are overall are more likely to talk about life risks than men.
Twenty-seven percent of females with financially dependent children say that while they are aware of life accidents, they do not think about the consequences.
- Health is the number one priority.
When surveyed, the majority of Americans say serious illness is the negative event they most likely may experience. Very few believe that they'll be involved in a plane crash or terrorist incident.
- There's a widespread distaste for risk.
One in four Americans responded that they are acutely aware of life accidents and hate taking risks.
"While we cannot eliminate all anxiety," Gelman said, "the more we know about perceptions and behaviors toward risks and insurance, the better equipped we are to provide advice and solutions that provoke Americans to act to secure their loved ones against hardships."
The AXA Equitable Protection Report is a major component of the company's continued effort to improve its understanding of the issues, attitudes and behaviors surrounding life risks and protection coverage. This improved understanding will aid in the development of superior financial planning products and solutions.
About the Survey
Survey respondents included both workers and non-workers age 25 to 65 in four distinct life-stage categories:
- Single: Singles less than 40 years of age with no dependents
- Pre-nester: Couples (married or living as a couple) with no children
- Nester: All types of households with at least one financially-dependent child
- Post-nester: All types of households with no more financially-dependent children or households composed of one person over the age of 40 with no children.
A total of 4,009 people were interviewed in Australia, Belgium, France, Germany, Hong Kong, Italy, Japan, Spain, Switzerland, the United Kingdom and the United States.
The primary sample from the United States consisted of a pool of 360 people. This sample constituted a national representation in terms of gender, age, occupational status and region.
The entire survey can be viewed at http://www.axa-equitable.com.
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