Single People Don’t Need Life Insurance and nine other life insurance misconceptions debunked by Allstate and its member companies

09/15/2005 – NORTHBROOK, Ill.

Single people or couples without kids don’t need lifeinsurance. Lifeinsurance is too expensive. Stay-at-home parents do not need lifeinsurance because they don’t earn a paycheck. These and other misconceptions surround lifeinsurance, a product that most consumers may need, but many still do not understand.

“Many Americans either don’t have a lifeinsurance policy or don’t have enough coverage to meet their immediate or long term financial needs,” said Matt Easley, Vice President of Life Products, Allstate Life InsuranceCompany. “The low level of Americans’ personal savings has increased the need for lifeinsurance to protect their family’s future.”

Interestingly, according to a 2004 survey from Allstate, 67 percent, or nearly seven out of 10 surveyed felt their lifeinsurance was adequate. On average, respondents reported owning four times their household annual income of lifeinsurance coverage. For families who have already incurred many of life’s big expenses like buying and financing a home or sending children to college, four times their income may be enough. Yet, on the other hand, younger families with decades of financial obligations ahead may not have enough lifeinsurance coverage to realize their goals. For example, as a rule of thumb the recommended amount of life insurancecoverage often cited is seven times an individual’s income, although individual circumstances should be taken into account when estimating actual lifeinsurance coverage needs.

September marks the second annual LifeInsurance Awareness Month. In an effort to debunk the myths surrounding lifeinsurance, Allstate and its member companies and divisions, including Lincoln Benefit Life Company and Allstate Workplace Division, offer the following realities:

Myth #1) Singles or couples without kids don’t need lifeinsurance. Fact: Lifeinsurance can help provide for loved ones in the event of death, even for those without children. For example, people in this group may carry debts that they would prefer were taken care of rather than taken out of assets left to their loved ones. Still, others may use lifeinsurance proceeds to help nieces, nephews, cousins or siblings achieve their financial goals. For a modest premium, lifeinsurance can help to provide for those who are left behind.

Myth #2) Lifeinsurance is expensive. Fact: Term lifeinsurance, which is lifeinsurance purchased for a period of time, is very affordable for many people. For example, a healthy, non-smoking, 35-year-old female who has a good family health history may be able to purchase a 10-year term lifeinsurance policy from Allstate with a $250,000 death benefit for an average of $14.66 per month. Or, she may be able to purchase a 10-year term lifeinsurance policy from Allstate with a $500,000 death benefit for an average of $14.88 per month.* Either way, the premiums are approximately the price of two movie tickets per month!

Myth #3) Stay-at-home parents don’t need lifeinsurance because they don’t draw an income. Fact: While a stay-at-home parent may not provide an actual paycheck for the household, they do provide services that would cost tens of thousands of dollars to replace. These include: the cost of day care, a chauffeur or taxi service, a cook and a home cleaning service to name a few. An individual lifeinsurance policy would help to ease the burden for the family if the stay-at-home parent should pass away.

Myth #4) You can take your lifeinsurance policy with you from job to job. Fact: Typically, group lifeinsurance purchased through an employer isn’t portable – meaning if an employee leaves the job, he or she is probably also leaving the lifeinsurance protection behind. However, because you own any individual lifeinsurance policies purchased through an insurance agent or a financial professional, leaving a job will have no effect on the coverage provided by them. So, in that case, if you change your job, you will still have your lifeinsurance policy even if you no longer have employer-provided group lifeinsurance.

Having a policy through an employer is also becoming a rarity. According to a 2004 U.S. Department of Labor Bureau of Labor Statistics Employee Benefit Survey, fewer workers have life insurance benefits. The number has declined eight percent since 1999, from a high of 56 percent to 48 percent in 2004.

Myth #5) Your beneficiaries will have to pay income taxes on the proceeds of your lifeinsurance policy. Fact: Lifeinsurance death benefits are generally income tax-free; yet very few people know this. According to LIMRA1 International’s Individual Life Buyer Consumer survey, only 34 percent of those surveyed knew their death benefit is tax-free. Note, however, that death benefits are subject to estate taxes if the insured owned or had any ownership interest in the policy.

Myth #6) You are not covered by your life insurance policy if you travel. Fact: In the unlikely event an insured passes away while in a foreign country, the policy would most likely pay out to the beneficiaries. However, many lifeinsurance policies exclude certain countries, such as those currently on the U.S. Department of State’s Current Travel Warnings List; so it’s important to review a policy prior to leaving the country and talk to your agent or financial professional if you have any questions.

Myth #7) Term lifeinsurance policies can’t be converted to permanent or whole life insurance policies. Fact: It is possible to convert a term life insurance policy into a permanent policy, depending on the policy purchased. However, individuals seeking to do so should expect an increase in premium. In addition, the conversion may have certain limitations or require renewals. Many people like to purchase term insurance, which tends to be less expensive, while they’re younger because it may make obtaining a preferred premium easier when they attempt to convert later.

Myth #8) You don’t need life insurance once your children are adults. Fact: Life insurance can help achieve a goal of leaving an inheritance to children or other loved ones or help relieve the burden of paying for final costs such as a funeral or final medical bills.

Myth #9) Kids don’t need life insurance. Fact: Parents mistakenly think that since kids don’t earn an income, they don’t need life insurance. The reality is that there are several good reasons why buying life insurance for children makes sense including: 1) Lower premiums, and 2) Ensure child’s future insurability in the unfortunate case that they become ill and thus will not qualify for life insurance.

Myth #10) People don’t need life insurance if they feel they have enough in savings. Fact: Most Americans do not have enough in their personal savings. According to a June 2005 U.S. Department of Commerce Bureau of Economic Analysis, the personal savings rate as a percentage of disposable personal income was 9 percent at the end of the first-quarter 2005. If people don’t have enough saved, most likely their family won’t be able to pay off final expenses or be able to hold onto assets like a home. A suggestion for those who may feel that purchasing life insurance is just another bill to pay is to have the premiums automatically paid with after-tax money from a paycheck.

“Education is the key to getting the right life insurance policy that will meet an individual’s needs,” explains Easley. “We hope that our efforts to dispel the myths surrounding life insurance will encourage consumers to look into this important financial product.”

For more information, visit http://www.allstate.com.

About Life Insurance Awareness Month
Life Insurance Awareness Month was created in response to growing concern about the large number of Americans who lack adequate life insurance protection. LIMRA estimates that more than 60 million adult Americans are inadequately insured. Forty percent of adult Americans have no life insurance coverage whatsoever. On average, insured adults have coverage equal to just 3.0 years of replacement income, which is far less than most experts recommend. Held each September, Life Insurance Awareness Month is an industry-wide effort that is coordinated by The Life and Health Insurance Foundation for Education (LIFE). LIFE was founded in 1994 in response to the public’s growing need for information and education on life, health, disability and long-term care insurance.

Allstate Life Insurance Company, Lincoln Benefit Life Company and American Heritage Life Insurance Company (Allstate Workplace Division) are proud members of the Insurance Marketplace Standards Association – IMSA. Our membership signifies our commitment to honesty and fairness in the sales and service of individually sold life insurance, long-term care, and annuity products.

The Allstate Corporation (NYSE: ALL) is the nation’s largest publicly held personal lines insurer. Widely known through the “You’re In Good Hands With Allstate®” slogan, Allstate helps individuals in approximately 17 million households protect what they have today and better prepare for tomorrow through approximately 13,600 exclusive agencies and financial professionals in the U.S. and Canada. Customers can access Allstate products and services such as auto insurance and homeowners insurance through Allstate agencies, or in select states at allstate.com and 1-800 Allstate®. EncompassSM and Deerbrook® Insurance brand property and casualty products are sold exclusively through independent agents. Allstate Financial Group provides life insurance, supplemental accident and health insurance, annuity, banking and retirement produ

About the author

Chris D is an advocate for Allstate Insurance.