Coming up Short: New Study Reveals Wide Chasm between Life Insurance Coverage and Common Financial Goals for Millions of Americans

First-Ever “Life Insurance Gap” Study Finds That Many Americans Have Just Half
the Life Insurance Protection They Need to Meet Their Own Self-Described
Financial Objectives

With Only About 4 Years’ Worth of Coverage in the Event of Breadwinner’s Death,
Family Goals Like College Funding and Retirement Planning Are Put Immediately At
Risk

95% of Americans Make It a Priority To Protect Their Kids By Using Seatbelts,
But Only 20% Have Enough Life Insurance For Family Protection
NEW YORK--(Business Wire)--
American families, already confronting a difficult economic environment, face
the danger of missing widely-held goals such as paying off a mortgage, funding a
four-year college education or financing a secure retirement because they lack
adequate life insurance protection, according to a major new “Life Insurance
Gap” study released today.

A detailed analysis of self-reported financial objectives revealed that
Americans typically have just 49 percent of the financial protection they need
to achieve their own stated financial goals for their families. This Life
Insurance Gap exists despite the fact that over 80 percent of American
breadwinners surveyed feel they have enough life insurance coverage. The Life
Insurance Gap translates into a median shortfall of almost $300,000 in coverage
for the typical American family.

“Instead of asking the insurance industry to provide a statistic on how much
life insurance coverage it recommends people should have, this study took a
novel approach by asking respondents to decide this amount for themselves, based
on what they wanted for their families,” said Brian Perlman, Ph.D., a partner at
Greenwald & Associates, which conducted the study. “The results are clear: most
Americans’ coverage comes up way short.”

Chris Blunt, senior vice president, New York Life Insurance Company, commented,
“If we visualize the life insurance gap in the context of a cross-country trip,
many Americans only have enough gas in the tank to get from New York to Omaha.
As a result, millions of American families are in danger of being stuck by the
side of the road, struggling to reach their financial goals, whether that means
funding for a secure retirement, paying off a home mortgage or financing a
college education. We’re hopeful these findings will help show American
consumers that it’s not the life insurance industry telling them they need more
coverage – it’s their peers, colleagues and neighbors across the country.”

“Today’s precarious economy has been a wake-up call for many Americans,
demonstrating how rapidly one’s financial circumstances can change,” added
Blunt. “Yet the current situation is also motivating a growing number of
consumers to take renewed stock of their financial decisions, including their
life insurance coverage. We may begin to see the Life Insurance Gap narrow as
more Americans talk to financial advisors, reconsider their strategy and look
toward adequate life insurance coverage as a step toward greater financial
security.”

According to the survey, breadwinners reported a median of approximately
$300,000 in life insurance coverage. Respondents were then asked about the ways
they planned to use their families’ life insurance coverage if needed. Options
ranged from simply replacing the breadwinner’s income to covering retirement and
college expenses. Based on the responses to these questions, the median amount
respondents reported they would need from the breadwinner’s life insurance
proceeds was $589,378. When contrasted with the $300,000 median amount of actual
life insurance coverage, the typical American family faces a 49 percent gap
between their financial goals and the money they would have available from their
life insurance policies, in the event of the breadwinner’s death.

The Life Insurance Gap survey examined the financial planning attitudes and
behaviors of 1,003 Americans age 25 and over with dependents, with a particular
focus on what they want their life insurance policies to cover in the event of
the death of the breadwinner. It was commissioned by New York Life Insurance
Company, the nation's largest mutual life insurer.

A Disconnect Between Perception and Reality

Despite the existence of the Life Insurance Gap, Americans believe they have
enough life insurance to protect their families. About 80 percent of respondents
stated that they are at least somewhat confident that they have enough coverage.
Even more revealing was the fact that 64 percent believe that their standard of
living would not decline if the breadwinner in the household passed away.

However, according to the study, household breadwinners have enough life
insurance, on average, to cover expenses for only four years after the loss of
the breadwinner.

“What happens in the fifth year?” Mr. Blunt asked. “The survey makes it clear
that while Americans feel they have enough life insurance coverage to cover
their immediate needs in the event of the breadwinner’s sudden death, when asked
more pointed questions about what their future financial needs would be, their
life insurance coverage is clearly falling short. Americans are unaware that
they are under-prepared, pointing to the need for education in this area.”

The study found that Americans are clearly concerned for their families’
well-being and safety. Over half of the respondents believe that it is very
important to have life insurance to protect their family. However, even though
most people understand the basic need for life insurance, buying it isn’t
necessarily a direct result, because only 20% of respondents have enough life
insurance to meet their self-reported needs. In fact, life insurance is seen as
less important than many other ways people protect their families. Even though
inadequate life insurance coverage can have a dramatic impact on a family’s
standard of living, only about half of the survey respondents said they felt
that purchasing life insurance is very important, in contrast with other
critical areas for family protection such as driving safely (95%), wearing
seatbelts (95%), and regularly testing smoke detectors (70%).

Inadequate Life Insurance Coverage Creates Other Risks

The survey also identified a number of other areas where American households are
at risk from inadequate life insurance protection. These include:

* Covering the Whole Family: Despite the fact that it could be a financial
burden to replace the work of a stay-at-home parent, 43% report having no
individual life insurance coverage at all for the household’s non-breadwinner.
* The Fallacy of Conventional Wisdom: Although some commentators counsel
Americans to “buy term and invest the rest”, the survey found that only 40
percent of those who planned to heed this advice actually did so – resulting in
less secure life insurance coverage and less personal savings.
* Retirement Risks: With only about 20% of private sector workers covered by a
defined benefit pension plan1, life insurance can mean the difference between a
fulfilling and secure retirement and one of constant struggle. The study reveals
that many Americans are operating under an assumption that group coverage with
their employer is portable and/or that term insurance will remain affordable.
These assumptions can leave the non-breadwinner uniquely exposed in retirement
upon the breadwinner’s death.
* Additional details on these points are included in the “Other Key Findings”
section that follows.

“What this study makes clear is that the cost of doing nothing can be enormous,”
Mr. Blunt said. “The Life Insurance Gap leaves far too many families exposed to
undue financial risk, whether they’re just starting out or looking forward to
their retirement years. However, by beginning to look at life insurance as an
asset to be maximized rather than an expense to be minimized, we can start to
close the gap and increase financial security for millions of Americans.”

Survey Methodology

The telephone survey of 1,003 consumers was conducted by the research firm of
Mathew Greenwald & Associates. Participants had to be at least 25 years of age,
married and/or responsible for the support of their children, and had to have
annual household incomes of $50,000 or more. The sample was evenly split between
men and women. The margin of error at the 95% confidence level for the 1,003
consumers surveyed is plus or minus 3.1%. The survey was concluded in May 2008.

Additional Detail on Other Key Survey Findings

Covering the Whole Family

Studies have shown that single parents would have to pay nearly $3 of every $10
they earn to cover the cost of childcare.2 However, 43 percent report having no
individual life insurance coverage on the non-breadwinner. Including both group
and individual coverage, non-breadwinners have a median of $50,000 in life
insurance coverage.

Term Vs. Permanent

Americans reported confusion about how life insurance works, which may
contribute to the Life Insurance Gap. Only half report that they understand term
life insurance very well, and fewer than four in ten understand permanent
insurance. In contrast, two out of three claim to understand auto insurance
well.

The survey’s findings challenged the “conventional wisdom” which counsels
consumers to “buy term and invest the rest”. About one quarter of respondents
who bought only term insurance for their household breadwinner indicated they
did so because they felt they would invest the difference. However, only 40% of
this group reported having actually saved or invested all of that money.

Life Insurance And Retirement

Over 80 percent of survey respondents believe that the breadwinner in their
household is at least somewhat likely to keep their life insurance coverage for
life. But the study reveals that their self-reported statistics indicate
otherwise. Only about one-third of breadwinners have an individual permanent
life insurance policy that will remain in place during retirement. The remainder
either has no coverage, term coverage or group coverage through work or another
source. Group policies are often term policies, which become very expensive or
unavailable as people age. In addition, most employees lose group coverage when
they leave their jobs. As a result, the likely scenario is that many Americans
will not have coverage in their retirement years.

In addition, studies indicate that retirement savings is inadequate. The 2008
Employee Benefit Research Institute Retirement Confidence Study shows that one
out of every two workers with incomes of $50,000 or more per year have less than
$100,000 in savings and investments.

Inadequate retirement savings compounded by insufficient life insurance coverage
on the breadwinner could place a serious strain on the typical American family’s
household finances in retirement, leaving families exposed to a range of
potential risks and expenses, including:

* Providing adequate retirement savings for a surviving spouse.
* Providing support for parents who rely on their grown children for financial
assistance and/or long term care.
* Supporting “boomerang” children who return to the home.
* Leaving a legacy for one’s heirs.
* Covering estate taxes.

About New York Life

New York Life Insurance Company, a Fortune 100 company founded in 1845, is the
largest mutual life insurance company in the United States and one of the
largest life insurers in the world. New York Life has the highest possible
financial strength ratings from all four of the major credit rating agencies.
Headquartered in New York City, New York Life’s family of companies offers life
insurance, retirement income, investments and long-term care insurance. New York
Life Investment Management LLC provides institutional asset management and
retirement plan services. Other New York Life affiliates provide an array of
securities products and services, as well as institutional and retail mutual
funds.

Please visit New York Life’s Web site at www.newyorklife.com and Guarantees
Matter, a site dedicated to retirement issues, challenges, and solutions, at:
www.guaranteesmatter.com for more information.

1 Bureau of Labor Statistics

2www.usatoday.com/money/perfi/general/2006-04-18-child-costs-usat_x.htm

New York Life
John Brine, 212-576-7260
John_S_Brine@newyorklife.com
or
Sloane & Company
John Hartz,212-446-1872
jhartz@sloanepr.com

Copyright Business Wire 2008