Where's the Safety Net?

Ownership of individual life insurance hits a 50-year low.

Although most American families have less to fall back on financially than they did when the economic downturn began, ownership of individual life insurance has hit a 50-year low, according to a new LIMRA study.

The Trends in Life Insurance Ownership study, conducted every six years by LIMRA, found that only 44 percent of U.S. households have individual life insurance. The number of U.S. households that have no life insurance whatsoever is also growing. Today, 30 percent of households (35 million) have no life insurance coverage, compared to 22 percent of households in 2004. Among households with children under age 18, which arguably have the greatest need for life insurance, 11 million have no coverage.

“Clearly, more American families are living on the edge- surviving paycheck to paycheck- and, as our new study suggests, too many without the safety net that life insurance provides,” says Robert Kerzner, CLU, ChFC, president and CEO of LIMRA, LOMA and LL Global. “The numbers tell a grim story. Today there are 11 million fewer American households covered by life insurance compared with six years ago. A majority of families either have no life insurance or not enough, leaving them one accident or terminal illness away from a financial catastrophe for their loved ones.”

Other Priorities

More than 40 percent of Americans say a major reason they have not bought more life insurance is because they have other financial priorities right now, such as paying off debt or saving for retirement. However, the drop in life insurance ownership is not because families are not feeling vulnerable. Among households with children under 18, four in 10 say they would have immediate trouble meeting their everyday living expenses if the primary breadwinner were to die today. An another three in 10 would have trouble keeping up with expenses after several months

Half of the households surveyed feel they need more life insurance- the highest level ever. Moreover, 24 percent of households with children under 18 want to speak with a financial professional about their life insurance needs; and a quarter of all households plan to buy life insurance in the next year. According to the study, life insurance beat out all other sources of financial assets or income that Americans expect to use to help pay their bills and maintain their lifestyle in the event of the primary wage-earner’s death.

“With so many families continuing to struggle financially, there has never been a more critical time for people to own an adequate amount of life insurance,” says Marvin H. Feldman, CLU, ChFC, president and CEO of the LIFE Foundation. “This study shows that Americans place great value on the need for protection, and half of all families recognize that they need more life insurance than they have, and that’s good news. Now they need to take the next step and get the coverage they lack before it is too late.”

Not sure how to reach their goals

About one in four middle-market households admit they do not know how to obtain or reach their financial goals, including buying life insurance. One of the biggest obstacles is lack of information. Almost eight in 10 households do not have a personal life insurance agent or broker to turn to and most of them say they never did.

Most individual life insurance policies are sold by insurance agents and many Americans want to keep buying this way. For instance, 60 percent of Baby Boomer households prefer to buy life insurance face-to-face. Younger generations say they also are interested in gathering information about life insurance online and at their place of work.

“As an industry, we need to reach out to consumers and educate them about the various ways they can purchase life insurance,” Kerzner says. “Whether they buy from an agent, get coverage through their employer, or make an online purchase, the important thing is that they get the coverage they need to protect their loved ones.”

For more information, visit http://www.limra.com/.
-Article written by Preeti Vasishtha and taken from the November 2010 NAIFA’s Advisor Today