Fewer Americans have life insurance

Industry survey blames economy, but high-pressure sales tactics may also play a role. Many families believe they are underinsured.

Posted by Teresa Mears Monday, August 30, 2010 1:31:41 PM

The number of Americans with individual life insurance policies is at its lowest level in 50 years, and 30% of Americans have no life insurance at all.

The figures come from the "Trends in Life Insurance Ownership" study, which the industry group LIMRA conducts every six years. This year's survey reports that the percentage of households with life insurance has declined since 2004, from 78% to 70%. Of the 35 million American households without life insurance, 11 million include children under 18.


Robert Kerzner, president and CEO of the industry group, blames the economy:

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. 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.

The loss of jobs, plus companies scaling back benefits to employees, has contributed to the decline in insurance for families, Leslie Scism at The Wall Street Journal noted, in a report about the survey. In 2004, one in three households relied solely on employer-provided life insurance. Today, that number is one in four.

According to the industry survey, many Americans -- 58% -- believe they need more life insurance. Of the households with children under 18:

  • 40% say they would have trouble paying living expenses immediately if the primary breadwinner died.
  • 30% more say they would have trouble paying the bills after a few months if the primary breadwinner died.

The WSJ attributed the decline in insurance coverage not only to the economy, but also to the insurance industry itself.

Prices of term life-insurance policies have dropped in recent years amid competition, but other types of insurance remain expensive to many middle-income consumers, and they often are put off by the hardball tactics of commission-paid sales agents. The industry also is grappling with a decline in the number of agents who sell to middle-class families, often described as those with household incomes of between about $35,000 and $100,000 a year.

Trent Hamm at The Simple Dollar has a concise guide to buying life insurance without busting your budget. His advice includes evaluating the advice you get from insurance sales professionals with skepticism:

Insurance salesmen will almost always come after you with a great pitch about some insurance-related product different than the basic policy you want. Let them ramble, but remember that you're not hearing about the large cut they take from selling you this policy. Ignore it -- or, if you must, take the information and actually research it extensively on your own. Don't let them sell you something you don't need.

Jeff Rose at Good Financial Cents has further advice on getting the best rates for term life insurance, which is recommended over whole life policies for most people. It's also much cheaper. He suggests starting your research by getting quotes online.

Even if you already have life insurance, you might want to shop around and see whether you can get a better deal, MSN Money columnist Liz Pulliam Weston suggests. You can use the MSN Life Insurance Needs Calculator to figure out how much insurance you need.


Not everyone needs life insurance, of course, and the survey did not indicate how many of the households without insurance were made up of single people with no dependents, who often don't need life insurance.


For those people, as well as for parents with dependents, disability insurance might be a better investment, Adam said in a guest post at Frugal Dad. He writes:

Many people argue that having disability insurance is more important than life insurance. The main reason for this argument is that for a 30-year-old male, you are four times more likely to become disabled than die.

More from MSN Money:

Tags: childreneconomyestate planninginsurancelife insuranceTeresa Mears
7/14/2013 8:11 AM

HaHaHa! Buy term ? Down with whole life insurance? People think insurance companies are in the business of giving away money by covering risk when it's likely to have to payout. Go ahead and try to increase your car insurance coverage for an accident you had yesterday.(Can you guess why they won't let you do that?) Most people will die without life insurance because term is designed to be far too expensive in the years you are likely die! Don't think so? Look at your term policy, see what the rates are after the term expires. Chances are you can keep it after the term has expired but you will pay thousands every month by the time your in your 70s. I bought a whole life policy with an well established, highly rated mutual company when I was in my early 30s. I get a statement every year & my death benefit & cash value keep growing and it's out performed the company's estimated growth. Yes the agent was a bit sales-y, but it looks like he made the right recommendations. He knew I would need more insurance in the future and he selected an option so I could add to the policy in the future at original age and rating! TERM INSURANCE is a GAMBLE! Don't think term would be so cheap if the insurance company thought there was a good chance you were going to die. The crazy thing is, if you win the bet, your DEAD! In about 7 more years my whole life policy will fund itself with the dividends I get and if I don't want to grow the cash value as much in it I can stop paying for it.  The real issue is most people think about insurance when they're already getting old and expensive! That's why term insurance is the answer for the Susie Orman crowd.  Yes, insurance is a bad deal if you to get it when you finally think you need it; but if you care about someone other than yourself, you'll make a commitment to it and get it early in life when it's cheap. Otherwise FEEL FREE to die poor and broke and leave your family the bill!

8/31/2010 2:50 PM

One reason there are fewer people with life insurance is that the big demographic bulge of baby-boomers have gotten past the point where they are still supporting their kids. Once the kids are grown (especially if you are both working) there's no need to insure your life.


As the guy said above, young people with kids should get term insurance for the 18-22 years they are supporting them. Other than that, what are you insuring against?

8/31/2010 1:28 PM
I would recommend that young families buy term insurance for the primary wage earner, especially if you can get it through your work . Don`t buy cash value insurance it`s a rip off. Most insurance agents will try to sell you insurance that is cash value because their commissions are larger. Don`t bother to insure children, it`s a waste of money. It`s harder to buy insurance because of obesity. Fat people are more likely to have life threatening medical problems. Also, I agree that young people are more likely to become disabled than dying. Also social security pays survivors benefits to families with young children to age 18. Payments vary based on workers average salary. Older people generally don`t need life insurance if their home is paid for. Have your body cremated it saves a lot on funeral expenses.
8/31/2010 12:30 PM

Life insurance??? I am worried about just finding a job, putting food on the table, paying the electric bill!!!!!

Those of you who are employed have no ideal what the job market is like. I have applied for $7/hr jobs and no luck.  I am willing to work for $7/hr 20 hour weeks but no companies are stepping up to the table.

8/30/2010 3:28 PM
This article comes a little late, but there are more reasons people do not have a Permanent Policy outside of work. 1)Children are an Emotional Loss, not such a Financial Loss because you are not Dependent upon them for Income, and if you are, well, then you would need to get a Policy because you would be considered Dependent upon their Income excluding the Dependent Credit(s) you get when Filing Taxes. 2)I just got a nice Letter from my Insurance Carrier's Home office stating, "Due to Changes in market conditions that have caused lower interest rates, or variations in the timing and amount of your premium payments, your coverage may not continue as you planned at the time of purchase." I will let you in on something, my call to the Agent's office was never returned, and he has my entire Book of Business. I used to have a Universal Life Insurance Policy worth $250k, but I have opted to Surrender it with the Home Office, and a call placed today has them receiving my Formal Paperwork last week,  and they are still working on getting a check to me. I asked them if they needed a Medallion Stamp, but the Representative said, "No". I asked them if this letter sent from the Home Office was creating a Run on Money, and the Representative said, "Yes" but the company was Solvent, but the Representative said," He felt people were acquiring their Cash Values because they were out of work." I told them how do you know that because your form never requests reason for Surrendering Policy? I told him that I don't need the money, but after 11 years, I would never think that this company would send me this type of letter. Let the Run on Money begin with Universal, Whole Life Policies and Annuities. I hate to say it, but I think this may be the beginning. Other Insurance Companies will be following suit if they have not already done so. My Insurance Company ranked high in JD Power, etc. but the times are a changing.
8/30/2010 1:49 PM

I don't have life insurance simply because I don't plan to leave nothing behind. Before I leave this world, I will make sure to spend all my money and use up all the toilet paper and napkins I have.


Nurse: Mr. Mike, would you like to have your butt wiped for another hundred times?

Mike: Yes. Since this is the last roll, please do it slow. Sad

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