New study: Americans say recession, declining stocks and soft home values less financially disastrous than death of spouse

May 14, 2008 Winsted, CT Share: Print Subscribe to Email Alerts

While current headlines and political rhetoric focus on the public’s fears of broad financial challenges such as economic recession and Social Security going broke, Americans in every demographic group say that their death or the death of their spouse would be a much greater threat to their family’s future financial situation, according to a new survey from ING, one of the nation’s leading financial services and life insurance companies.

“The new survey further clarifies the savings and wealth protection needs of Americans. The insight into consumers’ perceptions about their financial future and the wide-ranging reasons for saving money and having adequate life insurance may even seem contrary to popular assumptions about people and their money,” said Catherine Smith, CEO, ING U.S. Insurance. The wide-ranging survey by Ipsos Public Affairs of more than 1,000 adults revealed Americans’ contemporary attitudes and thinking on protecting their financial future and on life insurance, traditionally part of working people’s financial plan.

The survey demonstrates the central role life insurance plays in a comprehensive financial plan, including the important role of wealth protection. Financial-planning experts say that inadequate life insurance can be swiftly disastrous to families that don’t properly anticipate and assess the impact death of a spouse or partner can have on short- and long-term finances.

“As Baby Boomers’ financial needs have evolved, we see the heightened importance of risk protection combined with wealth creation,” Smith said. “Insurance products can help provide an important protective wrapper around retirement savings. This insurance wrapper effectively manages a diversity of risks and allows consumers to enter their retirement years with more confidence. Bottom line — life insurance has become the forgotten foundation of a long-term, comprehensive financial plan.”

Among the most interesting findings of the survey:

  • The top scenario Americans say would most negatively impact their financial future is having their savings stolen because of fraud/theft (77% say it would have an extremely or very negative impact). The second scenario Americans believe would most negatively impact their family’s financial future is their death or the death of their spouse or partner (67%).
  • Of 15 events or scenarios listed, falling home prices, a stock market crash, Social Security becoming insolvent, an economic recession, a pay cut and higher interest rates on loans and mortgages were all cited as having less of a negative impact on their family’s financial future than their death or the death of their spouse or partner.
  • Despite life insurance’s low profile compared to prevailing popular focus on wealth accumulation and investing, nine in 10 survey respondents said that people in their situation should have life insurance, although the reasons for doing so often vary between generations.
  • Nearly a quarter of the 86 percent of people who thought they should have life insurance, do not have it.
  • A significant majority of Americans (58%) say they do a better job saving and protecting their money than their parents do or did; and an even greater majority (65%) say they do a better job saving and protecting money than their friends and acquaintances.
  • Younger Americans tend to look to life insurance for taking care of a wider range of needs compared with older Americans, including funeral costs, children’s future education costs, and several years of household expenses, indicating that they see life insurance as playing a bigger role as far as wealth protection and wealth accumulation than do older Americans.
  • More Americans would rather go bungee jumping or stand in front of a crowd to make a speech than talk about life insurance, but more would rather talk with an agent about life insurance than sit through a job performance review with their supervisor, fill out a college application, or deal with a medical insurer about a planned surgery.
  • When it comes to advice and insight on life insurance issues, many respondents who have life insurance primarily consulted with an insurance agent or financial advisor about how much life insurance they needed (33%) — significantly more than those who consult with friends or family members or who simply chose a standard life insurance option available through work.

According to LIMRA International’s 2005 Trend in Life Ownership study, nearly 68 million Americans have no life insurance coverage; yet according to the ING survey, most Americans (71%) feel it is something they should not do without. Some of the most common misperceptions about life insurance are related to coverage amounts. Eight in 10 Americans say that they would need one or two year’s worth of household expenses to be paid by life insurance, while two-thirds say they would need at least 10 years of household expenses for their family. However, many financial advisors recommend families have more life insurance than that, depending on individual situations and financial circumstances. Annual budgetary items, such as mortgage payments, child care, insurance and basic living expenses, are all important factors to include.

“With term life rates continuing to drop and life expectancy rising, life insurance is the most affordable it’s ever been,” said Smith. “Americans need to leverage experienced life insurance professionals or the internet to find a product that best suits their needs and budget. It is as simple as getting any other form of insurance and just as essential to adequately protect your family and your assets.”

ING offers helpful tips and tools for people exploring life insurance, including a do-it-yourself life insurance calculator at www.inglifeinsurance.com. The site also provides basic, user-friendly information on life insurance and other wealth protection products.

Commissioned by ING and conducted by Ipsos in late 2007 and early 2008, the ING Life Insurance Study included over 1,000 randomly selected participants. The data are weighted to ensure the sample regional, age and gender composition reflects the actual U.S. population, and the margin of error is +/- 3.1%.

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About ING

ING is a global financial institution of Dutch origin offering banking, insurance and asset management to over 75 million private, corporate and institutional clients in more than 50 countries. With a diverse workforce of about 120,000 people, ING comprises a broad spectrum of prominent companies that increasingly serve their clients under the ING brand.

Ipsos Public Affairs is not affiliated with ING.