Women are increasingly recognized as primary financial decision makers and stewards of wealth. One of the ways to protect financial assets is through life insurance. As women continue to earn and manage more wealth, the dependency of others on women as providers for their families and businesses continues to grow. The economic influence and impact of women in the United States is increasing:
- 42% of businesses are women-owned. 1
- Women are the primary breadwinners in 40% of households. 2
- By 2020, women are expected to hold 32% of total global wealth, accounting to roughly $72 trillion. 3
When comparing the sufficiency of life insurance coverage between men and women, women typically are not as well protected as men, despite their growing economic influence and responsibility. Given the statistics above, it is staggering that only 56% of women have life insurance. 4
As providers and stewards of wealth, it is incumbent on women to examine life insurance needs. Life insurance can help ensure that families and dependents are financially provided for, and that businesses can continue to exist in the event of death. With that in mind, women should consider the importance of life insurance, various uses of life insurance, planning considerations unique to women, and how much life insurance is needed.
The Importance of Life Insurance
Whether a woman is a primary breadwinner, sole provider, or stay-at-home parent, the contributions to their families’ financial well-being is critical. Life insurance isn’t gender-dependent. Essentially, women need life insurance if there are people who depend on them financially. Having the appropriate type and amount of life insurance in place is foundational to a financial plan. While it can be a challenging to discuss mortality and related planning considerations, the rewards and benefits of doing so for families and businesses are immeasurable.
Uses of Life Insurance
There are many factors to evaluate when considering the need for life insurance to protect families and businesses, including:
- Covering a mortgage. Typically, a mortgage is a family’s largest expense.
- Paying off debt. It’s important to consider how a family will pay off any debt if something unexpected happens.
- Replacing loss of income.
- Paying for children’s education.
- Replacing services that a stay-at-home parent routinely provides.
- Protecting a business owner’s business for continuity and succession.
- Supplementing group insurance policies.
Beyond income replacement, life insurance can be a very effective asset and tool for preserving and transferring wealth, including:
- Income tax-free death benefits (in many states).
- Direct payment to a named beneficiary, outside of probate.
- Legacy, charitable, and tax-planning opportunities.
- Borrowing against a policy’s cash value benefit to provide an option for paying off bills, financing a college education, or taking care of other unexpected life situations.
- Protection for knowing that care can continue for elderly or disabled family members.
- Living benefits which can provide lifetime cash flow if the policyholder is diagnosed with a chronic or terminal illness.
Planning Considerations for Women
In broader terms, women are no different than men with regard to their financial planning needs—including wealth management, retirement planning, and insurance. However, women face different risks and challenges than their male counterparts, which can have a significant impact on their ability to achieve financial planning goals.
Women statistically live longer than men and therefore have a greater chance of outliving their retirement assets. According to the Centers for Disease Control, the average life expectancy for U.S. women is 81.1 years, compared to just 76.1 years for men. 5 Additionally, women are more commonly part of the “sandwich generation,” caring for both children and aging parents. This data, in addition to the statistics outlined at the beginning of this article, point to the fact that there are variables for women that differ from men with regard to insurance planning.
How Much Life Insurance Is Needed?
While a life insurance plan needs to be customized to an individual’s unique situation, these are some areas to consider when determining the amount of life insurance needed:
- Debt load. How much would it cost to pay off outstanding debt?
- Income replacement. What would a remaining spouse or dependents need to live comfortably?
- Education. Are there children whose education needs to be funded?
- Purpose. How does insurance fit within an overall financial plan?
- Optional riders. Is there a need to cover long-term care, children, disability income, accidental death, or critical illness?
As with all other aspects of financial planning, an individual’s needs and personal situation are the most critical aspects in determining the best options available. Looking at insurance needs and opportunities within a holistic, integrated financial plan helps ensure the best plans and outcomes. A conversation with a financial advisor can help determine the specific amount and the type of insurance that is appropriate, and support the development of a plan to protect, preserve, and transfer wealth.
As the financial impact and influence of women continues to evolve, creating financial plans to protect families and businesses is of enormous value to consider and implement.
Cindy Carlson serves as the Manager for Underwriting at ViaForte, an affiliate firm to Carlson Capital Management. We recommend that individuals consult with a professional advisor familiar with their particular situation before taking any action.
- Life Insurance Ownership in Focus, U.S. Person-Level Trends: 2016, LIMRA: https://www.limra.com/en/research/research-abstracts-public/2016/life-insurance-ownership-in-focus-u.s.-person-level-trends-2016/