Wondering how to feel more secure about your finances? The answer could be as simple as buying more life insurance. A landmark research study commissioned by First Command Financial Services, Inc., reveals that having an appropriate level of life insurance provides a significant lift in feelings of financial security.
“Our research reveals that having enough life insurance to cover both a family’s debt and the income necessary to meet other financial goals has the strongest positive impact on feelings of security,” said Scott Spiker, chief executive officer of First Command. “Feelings of financial security actually increase as the level of life insurance coverage increases.”
The two-year study, designed and implemented by First Command’s research partner, Sentient Decision Science, LLC, assesses the financial behaviors and attitudes of 9,300 American families interviewed between 2006 and 2008. The data represents the feelings and behaviors of individuals between the ages of 25 and 70, with a household income of at least $50,000 for both the U.S. general population and specifically within military families. The research initiative is part of the First Command Financial Behaviors Index, a quarterly report of monthly tracking surveys designed to understand the changing financial behaviors of the American public.
First Command’s research indicates that simply having some life insurance does not provide a significant lift in feelings of financial security. Rather, it is critically important to have the right amount of life insurance relative to a family’s financial goals and current levels of debt.
The amount of debt a family carries can be a primary factor affecting feelings of financial security. The death of a loved one can drastically change the financial picture for a family and debt can become a burden that is suddenly too much to bear. Making payments on mortgages and loans and other long-term debt while simultaneously trying to keep up with costs of daily living can push a financially compromised family to the brink.
When faced with the death of a breadwinner, an underinsured family may have to sell assets, sacrifice their standard of living, and move out of the home that they have lived in for years. They may be faced with the stark reality that their children may no longer be able to go to the school of their choice, and that they will need to work well into their golden years in order to make ends meet in retirement.
“Life insurance provides the much-needed protection for families faced with this kind of financial strife,” Spiker said. “Having the right amount of life insurance protects against the burden of unwieldy debt and keeps the promise of reaching a family’s financial goals intact.”
Covering debt is only part of the security that having life insurance provides. In addition to paying off debt, life insurance can cover the financial goals of your family. This is an important consideration for families investing in the security that life insurance can provide. A life insurance plan that takes into consideration the amount of household income necessary to meet a family’s other financial goals, such as college tuition and a comfortable retirement, serves a family better than one focused on final needs benefits alone.
In fact, First Command’s research indicates that families who have enough life insurance to replace the household income from today until retirement feel significantly more secure than those families who have not planned to cover household income over that same period of time.
Furthermore, these families feel that they are doing the right thing in planning for their financial future and report significantly higher levels of satisfaction with their levels of life insurance.
“Having the appropriate amount of life insurance can provide a significant lift in feelings of financial security for American families,” Spiker said. “Individuals who have enough life insurance to cover their debt levels and their household income until retirement, report much higher levels of satisfaction with their life insurance and feelings of financial security overall.”
About the research
First Command commissioned Sentient Decision Science, LLC (www.sds-insight.com) to gather data on the active financial behaviors and the state of financial security of the American public. From 2006-2008, more than 9,300 American families were interviewed online using a U.S. Census-based sample. Data was compiled and analyzed to assess trends in financial attitudes and behaviors over time. The data represents the feelings and behaviors of individuals between the ages of 25 and 70 with a household income of at least $50,000. First Command will continue to conduct monthly tracking surveys to understand the changing financial behaviors of the American public and publish results quarterly as part of the First Command Financial Behaviors Index.