Associate professor Craig Israelsen teaches a family finance course at Brigham Young University and just finished a section on life insurance.
He says his students were pretty glassy-eyed during the discussion.
"It's stunning to them that they need to be in the market for a half-million dollars worth of life insurance," Israelsen said. "When you're young, you have a feeling of being bulletproof."
But in a state where couples marry young and start families shortly thereafter, it's a bit surprising that more Utahns don't invest in life insurance policies. According to a statistical comparison by Bankrate, Inc., Utah has the highest marriage rate in the nation, but ranks 45th when it comes to life insurance policies in force.
Israelsen said he understands the impulse to deny one's mortality and the demands on a growing family's pocketbook, but he says life insurance offers families an important safety net.
"If a 25 year old dies today, that exposes the surviving spouse to 40 to 45 years of unearned income," he said. "A young person, a nonsmoker, could get $1 million of life insurance for about $800 a year. That's about what they're spending on a cell phone."
Life insurance 101 • Life insurance is grounded on the premise that we're all going to die and that if your life is cut short, the policy will help pay the bills for those left behind.
"The trigger to consider life insurance is if you have dependents," Israelsen said. "In the LDS population, marriage and dependents come early. If you're 23 with kids, then you're in the market for life insurance."
Plans fall into two categories: individual policies, which are owned by, of course, an individual; and group life insurance, which is most often tied to employment or a union. And you can buy policies for a period of time (called term insurance) or for your entire life (called a whole life insurance plan), which costs more.
The Bankrate numbers show that of the state's 2.03 million residents older than 15, only 783,000 own individual life insurance policies. Pam Perlich, Senior Research Economist in the Bureau of Economic and Business Research at the University of Utah, questioned the analysis.
"Fifteen-year-olds don't buy life insurance," Perlich said. "Because young people are a larger share of our population than any other state and because we have the largest number of kids per household, that skews the data."
Kent Christensen, a Farmer's Insurance agent in Salt Lake City for the past 21 years, also took issue with the Bankrate conclusions, saying that may not reflect those covered by a company life insurance policy. Still, he acknowledges individual life insurance is a tough sell for young adults.
"I've talked with 10 20-somethings in the last four months and they won't sit down and discuss it," said Christensen. "It's 'something I'll buy later' or 'I don't need it' or 'I have some at work.' They just think they're immortal."
But he argues that consumers need to be educated.
"I look at it like a utility bill," Christensen said. "You pay $140 a month on gas to keep the house warm, but you won't spend $100 on life insurance to ensure that your family can stay in that house? I can't figure it out."
How much life insurance do I need? • Christensen said the rule of thumb is your life insurance policy should pay out 10 to 12 times your annual income. He advises conducting a needs analysis to find the amount of coverage that's right for your family, figuring in your mortgage, your student loans, your standard of living.
"If you're paying for your wife's 2007 Lexus now, you better give her enough money to keep paying for it," he said.
BYU's Craig Israelsen best advice: Don't skimp.
"If you're underinsured, it's better than nothing, but not by much," Christensen said. "It's like saying I've got food. If I only have two crackers, it's food, but it won't make a difference."
Shopping for life insurance
When you have dependents (marriage, children), it's time to buy.
Check with a financial adviser (who won't profit from selling the policy) about what type and how much you need.
Buy term life rather than a cash-value or whole life policy.