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Preventing Poverty: The Life-Changing Truth About Life Insurance

April 3, 2017

Life insurance exists as a means of poverty prevention, and it’s effective, but it’s also extremely underutilized.

Poverty is something we tend to think of in its most extreme forms. When we hear the word, we think of hungry children with sad eyes…a homeless man holding a sign quietly on a loud street corner…a tired mother stoically sweeping the dirt floor of her family’s third world home.

For most of us, it seems very far away from where we are. But it isn’t. 

When last measured by the U.S. Census Bureau, the poverty rate was 14.8%, higher than it’s been since the 1960s. 21.1% of children under 18. 13.5% of adults aged 18-64. 10% of adults 65 and older. All living below the poverty level.

If we don’t change the way we’re doing things, over HALF of Americans (51.4%) will experience poverty at some point before the age of 65.1

Is there anything we can do about this? YES. Absolutely.

First, we can acknowledge that the reach of poverty is not limited to certain people in certain locations or certain situations.

You can be well-educated and poor (especially if that education required student loans, as is the case for most Americans). You can be poor while living in the city, or the country, or the suburbs. You can be poor with a big family, or a small family, or no family, or a cat, or all by yourself. You can work really hard and still be very poor. 

And here’s the thing that really blindsides us: you can be poor when you’ve NEVER BEEN POOR BEFORE.

That’s where we can start to make some progress.

Half of families who fall into poverty do so as a result of a sudden decrease in household earnings2, often due to death or disability.

Without planning and protection, one tragic incident can tip the scales drastically from financial comfort to extreme poverty.

Government programs can help, but their benefits are limited and support is generally temporary. In 2010, employers spent $1.6 trillion on employee benefit programs, most of which either directly or indirectly protect families from poverty3, but it still doesn’t take the place of private life insurance.

An individual private life insurance policy provides not just a safety net to bounce back onto your feet from or a quick fix to get your family through the worst part of a bad time, but a sustainable solution to maintaining financial stability and quality of life.

So why don’t more people, especially those currently enjoying comfortable lives, make life insurance a priority? Well, for starters, most of us don’t really understand it.

A study from 2012 found that:

  • 65% of Americans don’t know that life insurance benefits are tax-free
  • 76% don’t know that policies are protected if a carrier goes bankrupt
  • 82% don’t know that the primary reason insurers collect medical information is to determine premium rates4

Then, of course, there’s the awkward truth that buying a life insurance policy is acknowledgement of the fact that you’re going to die. And not only that you’re going to, but that you don’t know when or how. We’re all aware of our mortality, but we understandably don’t relish the idea of signing off on it. 

That’s where Our Life Covered comes in. We want to start a conversation that isn’t about death, but simply about preparation. About taking the steps now to make sure the people you love have what they need later.

ourlifecovered.com is here to make the hard stuff a little bit easier. The less time you have to spend shopping for life insurance, the more time you’ll get to spend enjoying the life you’re protecting. Because that’s what this is really all about. Making sure that the beautiful life that you’ve built goes on.

  1. From: U.S. Department of Labor, Bureau of Labor Statistics, National Compensation Survey, March 2012.
  2. EBRI, Data Book, chapter 2. Rank, Mark R.; Hirschl, Thomas A., “Estimating the Life Course Dynamics of Asset Poverty”, presented at the Panel Study of Income Dynamics Conference on Pensions, Private Accounts, and Retirement Savings over the Life Course, University of Michigan, 1999.
  3. Charles River Associates, "Financial Security for Working Americans: An Economic Analysis of Insurance Products in Workplace Benefits Programs", July 2011.
  4. Douglas, Jennifer, "What Do they Know, Anyway?, Consumer Understanding of Life Insurance", LIMRA International, 2012.
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