While the typical life insurance lead supplies agents with a great deal of information that can help them determine the best policy for their client, a discussion is needed to gauge how much coverage they'll ultimately need. Insurance professionals may want to impart as much guidance as possible, as a recent study suggests retirees often underestimate what would be considered a sufficient amount for their personal situation.
According to a new analysis from the Society of Actuaries' "2011 Risks and Process of Retirement Survey Report," four in 10 men and women either in or approaching retirement undervalue their life expectancy by five years or more.
Life insurance expert Cindy Levering indicated that not having enough coverage to last through retirement years can pose issues that may be difficult to ameliorate.
"Underestimation of life expectancy, combined with having too short of a planning horizon can result in inadequate funds for retirement needs," said Levering. "here is a general misunderstanding of what ‘average life expectancy’ means, and when people are told they will live to an age such as 80 or 85, they don’t realize that this means there is a 50 percent chance that they could live past that age."
SOA statistics indicate that life expectancy has increased considerably in a fairly short amount of time Since 1960, the average lifespan for males has jumped from 66.6 years to 75.7. For females, life expectancy has soared to 80.8 years from 73.1.
Yet despite this, few believe they will outlive the average person of the same age and gender, as 54 percent of retirees said they didn't think they'd get there. Only 31 percent of retirees cited an age that was longer than the typical lifespan.
Levering noted agents should be advised of this and should strongly encourage their clients to err on the side of caution by securing plenty of life insurance coverage, which helps minimize the risk of exhausting financial resources.
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