Advisers who haven’t talked to their clients about life insurance may be missing an important teaching moment.

Chances are, your clients do not have nearly enough life insurance coverage to protect their families, if the findings of a recent survey from Nationwide Financial are any indication. The survey finds that consumers hold an average of about $300,000 in life insurance coverage, even though they will earn approximately $1.5 million before they retire.

“Filling a $1.2 million income replacement gap without life insurance is a tall order for surviving family members when you consider late-life expenses such as college, weddings, retirement, health care and long-term care,” Eric Henderson, senior vice president of life insurance and annuities at Nationwide Financial, said in a statement.

Henderson urges advisers to help clients avoid the mistake of assuming that providing a large sum of money for their beneficiaries will be enough to protect them.  Instead, he says, “they should think about how much of their income the insurance will replace. If it doesn’t replace a high percentage of it, their family faces the risk of financial disruption or a reduced standard of living.”

According to the survey, the average life insurance policy currently replaces just 16% of the income the insured person will earn before retirement. Despite this, 66% of consumers who have life insurance are somewhat or very certain they have enough insurance to replace the income they or their spouse/partner would generate for the remainder of their working careers. More than half (55%) think they could replace their spouse or partner’s income.

“Many Americans have the false perception that they have an adequate life insurance plan in place,” Henderson says. “When they do the math, the true picture may become clearer, and hopefully motivate action.”

The online survey polled 1,163 U.S. adults, ages 24 to 66, who are married, partnered or have dependents, are not retired, and have household incomes of $24,000 or more. It was conducted March 15 – 21, 2013.

Correia writes for Financial Planning, a SourceMedia publication.

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