Life insurance in the United States of America is a very popular aspect of life as compared to other countries. The United Kingdom probably comes a close second.
What we will do here is to compare life insurance in the U.S. with that of other countries and study the special features of insurance in the U.S.
Despite its popularity, the actual percentage of people covered by insurance is less compared with other countries. According to a survey done in 2007, the U.S. rates very low in insurance spending in comparison with other countries. The comparative percentage of spending on health insurance, for instance was as follows:
This gives us a picture of the low level of insurance spending in the U.S. One of the main reasons for this is the cost of insurance which is comparatively higher in the U.S. This is again linked to the fact that health care in the U.S. is shockingly expensive, so while people might get to a doctor, they may not be able to get the appropriate treatment as they cannot afford the coverage that is required. Steps are under way however to reduce the cost of insurance, and today a major chunk of the younger American population is being targeted. A survey done a few years back revealed that 46% of students in the U.S. are not interested in insurance.
How does the cost of life insurance stand in comparison with other countries? This is a very complex question, which has two aspects to it. Firstly, let us consider the position of the United States in terms of cost of living. This should give some indication to the current rates of life insurance in relation to other countries. According to a survey done in 2009, the five most costly cities were, starting from the most expensive: Tokyo, Osaka, Moscow, Geneva and Hong Kong. This should indicate that the rates in the U.S. should be less expensive.
However, this takes us to the second point. The American healthcare system is one of the best in the world, and indeed, the most expensive. It is for this reason that the insurance rates also tend to be on par with this standard, and so this has caused life insurance in the U.S. to be costlier when compared to other countries.
There are two major categories of life insurance in the U.S. – whole of life insurance and term life insurance.
Whole of life insurance: As the name indicates, this type of policy covers the life of the policyholder for the duration of their life. The premiums are usually fixed, but provisions may be given for varying the premiums – this depends on how the policy is written. As long as premiums are being paid regularly, there is a guaranteed death benefit which is nothing but a sum of money to be paid by the insurance company to the beneficiaries on the death of the policyholder.
Term life insurance: In this type of insurance, there is no guarantee that the policyholder or the beneficiaries will get any money from the insurance company. These policies are drawn out for a fixed term of say, five to twenty years. In the even of the death of the policyholder during this term, a sum will be paid to the beneficiaries. But if the policyholder survives the term, then no money is paid out. During the life of the member, the policy does not have any cash value. This is more popular than whole of life insurance because it is cheaper and more flexible. Therefore in the U.S. the most preferred life insurance is term life insurance.
There are further categories of life insurance depending on special circumstances. It is not feasible to go into the details of all of them but to mention just a few – different types of such as disability life insurance, war veterans’ life insurance and so on.
So in conclusion we can say that life insurance in the United States is very well developed and in comparison to other countries among the best but also the most expensive.