Majority of Americans unclear about life insurance benefits
Many are unclear about the full benefits and whether or not it is taxable.
The number of Americans with permanent life insurance has dropped because they may not understand the full benefits of it.
The 2018 Life Insurance Needs Survey from Allianz Life found that 9 out of 10 people polled said they understand the terms of the death benefit – funds paid to family and loved ones upon the death of the insured party.
But two-thirds of those polled are unsure about or do not believe that death benefits are non-taxable, and just over half, 51%, said they do not believe cash value from life insurance can aid in supplementing other financial goals.
Allianz said many Americans weren’t aware that permanent life insurance has many financial benefits.
This has seen the number of Americans with life insurance fall on a numbers and percentage basis during the past several decades.
85 percent of the survey’s respondents said products that “provide a source of tax free income in retirement” were a top priority while 78 percent said it was products that “provide a source of tax-free money for family/loved ones”.
68 percent said products that “provide the ability to use funds to pay for college” were also among highly valued product features, according to the report.
“Too many Americans with significant retirement assets are not optimizing their financial strategy because they simply don’t know all of their options,” Allianz Life Senior Vice President of Life Insurance Sales Jason Wellman said.
In 1965, Americans bought 27 million life insurance policies either individually or through an employer.
But in 2016, even though the population had grown by more than 50%, the number of life insurance policies sold remained at just 27 million, according to Peter Orszag, vice chairman of investment banking at Lazard.
He added that the gap in consumer education may be influencing this downward trend and fewer families are buying life insurance, while those who do are buying more valuable policies.
Learn more about how life insurance works and its potential tax benefits in our life insurance finder guide.