MetLife Study: Few Beneficiaries Find Life Insurance Proceeds Meets all Their Needs

A husband's or wife's premature death can have a long-term financial impact on the surviving spouse, according to a MetLife study.

According to the study, even five to seven years after their loss, more than one-third (36 percent) of individuals surveyed say they remain financially vulnerable. The amount of the life insurance proceeds can make an exponential difference in the strength of a safety net, according to findings released today from MetLife's Study of the Financial Impact of Premature Death. For example, about half (53 percent) of widows and widowers who received three or more years of household income in life insurance benefits felt financially secure in the year following their loss. However, that percentage drops to 27 percent for beneficiaries receiving a lesser amount and to only 11 percent for survivors who collected no life insurance proceeds.

The study also highlights a gender gap with regard to life insurance ownership. In general, wives who received life insurance benefits obtained an amount equal to about two years of household income. However, husbands received even less - only one year's worth of household income. Approximately three-quarters of beneficiaries did not feel that the amount of the life insurance proceeds they received amply met their needs. These findings underscore the fact that many Americans are underinsured, particularly women.

While the study found that eight out of ten survivors had to make financial adjustments, life insurance may help mitigate these actions. For example, of the individuals who participated in the study:

- 42 percent who received no life insurance benefits said they had to borrow money from friends and family compared to 25 percent of those receiving benefits.

- 36 percent who received no life insurance benefits relocated residences compared to 23 percent of survivors receiving benefits.

"While thinking about one's own death can be difficult, taking steps to help ensure a family's financial security can be easy. A basic step - which people often overlook - is to take advantage of opportunities provided by employers to obtain additional life insurance coverage at group rates," says Graham Cox, vice president, MetLife Life Product Management.

Many employers allow their employees to purchase supplemental life insurance coverage at competitive group rates during the fall open enrollment season and often at additional times of the year. In addition to purchasing life insurance at work, individuals should also consider working with a financial advisor that can help them further understand the importance of both group and individual life insurance as part of their overall financial plan.

"Consider this divergent perspective - according to MetLife's 7th annual Employee Benefits Trends Study, only 26 percent of working Americans think life insurance is an important workplace benefit. However, for families who receive the proceeds it can make a world of difference," adds Cox.

MetLife's Study of the Financial Impact of Premature Death was fielded June 12 - 26, by Zeldis Research Associates. The study was comprised of 1,000 widows and widowers. All participants had lost a spouse within a period of six months to seven years prior to the survey, and the deceased spouse was between 25- and 60-years-old at the time of death.