A third of households go without life insurance

By Dow Jones Newswires-Wall Street Journal
Posted Aug. 30, 2010 at 6:37 a.m.

Nearly a third of U.S. households have no life-insurance coverage, the highest percentage in more than four decades, according to research firm Limra.

About 35 million U.S. households neither own their own life-insurance policies nor are covered under employer-sponsored plans, up from the 24 million, or 22 percent of households, without coverage in 2004, according to the study this year by Limra, of Windsor, Conn.

Limra is an industry-funded research organization that has conducted periodic surveys of ownership trends since 1960.

The percentage without life insurance is a sign of the financial pressures on middle-income families as the economy struggles.

The rise reflects tight household budgets, loss of employer-provided coverage as a result of layoffs, and cutbacks by some employers in their benefits packages, Limra said.

Half of the respondents in the latest survey said they needed more life insurance, but many haven’t bought it because their financial priorities include paying off debt.

Among households with children under 18, four in 10 respondents said they would immediately have trouble meeting living expenses if a primary wage earner died, and another three in 10 would have trouble keeping up with expenses after several months.

“Clearly, more American families are living on the edge, surviving paycheck to paycheck, and, as our new study suggests, too many are without the safety net that life insurance provides,” said Robert Kerzner, president of Limra.

While the poor economy is a factor in the most recent decline in coverage, the life-insurance industry itself shares blame in the falloff in sales, according to other recent studies and consumer advocates. 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.

Since the 1970s, the number of company-affiliated life-insurance agents has dropped by nearly one-third, to 174,000 in recent years, according to data from Limra.

Agents have focused on higher-income families, who can afford the bigger policies that pay the higher commissions. Agents also have favored sales of investment and retirement-income products like variable annuities, which also pay commissions.

Life-insurance coverage provided through benefits packages at work has played a significant role in protecting families in recent decades, but it may be lost if the wage earner loses his job or reduces work hours.

Employers scaling back or eliminating coverage is another factor in the declining percentage of households with insurance, Limra noted.

The number of households relying solely on life insurance provided through an employer shrank to one in four, from about one in three in 2004, when the previous survey was conducted.

And over the same period, the percentage of all households that have life-insurance protection outside of an employer-sponsored plan dropped to 44 percent, from 50 percent.

Many survey respondents said they didn’t know where to get help buying life insurance. Almost eight in 10 don’t have an insurance agent or broker. Sixty percent of baby-boomer households would prefer to buy life insurance face to face, while younger generations are interested in gathering information online, the survey found.

In 2009, insurers issued 9.4 million individual life policies in the U.S., about one million fewer than in 2004, according to Limra.

Analysts said the industry hasn’t solved the puzzle of how best to reach middle-income households in a cost-efficient manner and in a way that enables consumers to feel comfortable making financial decisions.

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  1. Metoo Aug. 30, 2010 at 8:52 a.m.

    One of the reasons many people do not have life insurance is that many financial advisors advise against it. At most, they recommend term life insurance for families with children under 18. Even then, it may not be recommended if both parents work full-time at decent paying jobs. While the current jobs situation certainly puts a crimp in that scenario, nevertheless as a general rule money invested other ways has been more profitable in the long term.

  2. LAB Aug. 30, 2010 at 10:48 a.m.

    Life insurance is always advertised as leaving money for final expenses. Always hold enough to pay for burial costs and specify in your will to the beneficiary that that money is to be used specifically for that. The rest? The creditors can wait until the cows come home because if there is no money in the estate to pay them, they receive nothing. They can’t go after the remaining family unless the debt was joint with someone who is still alive. A lienholder on the decedent’s house can foreclose unless the family keeps up the payments. In the end, best to have a pre-paid funeral and let the rest fall in lockstep.

  3. ForFarkSakes Aug. 30, 2010 at 11:29 a.m.

    Life insurance, especially the outdated types sold in the US such as Term Life, are a waste of money.
    If your finances are structured properly, and your will is solid, you do not need life insurance.
    Many Term Life insurance products give you NOTHING in return at the end of the term. Your money is gone, and you receive no benefit. Most Term Life products sold abroad that are not ‘key man’ policies have a linked investment component. When the term expires and no death has occurred, the investment is returned to the policy owner. At least there you see some return on the premiums you have paid over the policy life.

  4. Innocent_III Aug. 30, 2010 at 11:48 a.m.

    If no one is depending on your income, then why would you buy life insurance?

  5. CPA Planner Aug. 30, 2010 at 11:50 a.m.

    While there are many many reasons for carrying life insurance, there are many people who simply don’t need it. One third of the people sounds about right. If you have enough money put aside for your funeral, you have no one that depends on you financially, and you have no other good reason for carrying life insurance such as for business, paying estate taxes, or wanting to leave a legacy, then there really isn’t much need for life insurance.

    The bigger problem is that a lot of people don’t carry disability insurance.

  6. AgentKP Aug. 30, 2010 at 11:54 a.m.

    That is a backwards way of looking at things…Term insurance is “piece of mind” insurance. I always tell clients to think of it as they do car insurance-it’s there if, God forbid, you need it. Term insurance is NOT an investment. It’s the quickest and cheapest way to make sure you family is covered if something were to happen to you.

    Life insurance with “return of premium” riders and linked investment accounts (variable) cost more than just straight up term insurance. This is why it’s a good solution for many people who just want to cover themselves until the kids are out of college and the mortgage is paid off.

    Term insurance isn’t the solution for everyone, but it does have its place.

  7. Mich Aug. 30, 2010 at 12:12 pm

    Life insurance on the open market is like health insurance on the open market; you can’t get it unless you are 100% healthy and the lowest possible risk they can think of. I have employer sponsored insurance but without it I will go without not because I don’t want it, but because I can’t get it.

  8. JOHN C Aug. 30, 2010 at 12:19 pm

    Life insurance is the best way to care for your loved ones and IMMEDIATELY replace LOST income for your family, anyone who tells you otherwise is a stone cold liar or thief. Life incurance is the first step in fiancial planning, your beneficiaries recieve it TAX FREE!

  9. Jack Aug. 30, 2010 at 12:23 pm

    Your have to be nuts not to have some life insurance for your family to rely upon if you die early or accidentally.

  10. Southernsider Aug. 30, 2010 at 12:34 pm

    The federal or state government should subsidize life insurance premiums for those that can’t afford it. What will their families do if they die?

  11. joe Aug. 30, 2010 at 1:20 pm

    Life insurance? Why bother. I gave up my health insurance also.
    My new plan is to live in heavy debt, and if I get sick I’ll show up
    at the emergency room without any ID and say my name is Jose.
    They have to treat me by law – insurance is for suckers.
    If I die, the debt goes away and I’ve already benefitted by spending
    the money I left as debt and gave away to friends and family as presents.
    What a world we live in – for a long time I incorrectly thought that we should provide for ourselves and think of the country first, but the democrats have changed that old school of thought. I don’t even recycle anymore – why save the planet when our own country is doomed anyway?

  12. Innocent_III Aug. 30, 2010 at 1:37 pm

    Part of the reason why life insurance doesn’t sell even to people who probably should have it is not sold well and efficiently.

    Most individual life insurance policies are sold by an agent who spends considerable time presenting the product. The problems with this are, (1) this is an expensive way to sell anything; and (2) an honest salesperson can be expected to tell you all that’s good about a product– which is not the same as telling you all about it.

    It’s a poorly kept secret that most of the premiums for the first two years of a cash-value life insurance policy are paying for the sales commission. Which might be worth it if customers received complete information. But, of course, they don’t– and expecting a commissioned salesperson to provide full disclosure defies human nature.

    For example, there where all those “universal life” policies sold to people who were told that the premiums would decline and then disappear after a few years. This “analysis” was based on assuming unreasonably high rates of return in the underlying investments.

    Perhaps the best value is to be found online, yet, online you’re dealing with people you don’t know and with companies that may be less than upfront. For example, your term life policy may say that premiums can only be raised for you if everyone in your category also receives an increase. But, the underwriter may then offer new deals for healthy policyholders, leaving you in a “left behind” category that will receive sharp premium increases.

    In short, this should be a simple product to buy, and should require little more thought than figuring out how much death benefit you want to buy, and how long you will want the insurance. But, it’s not.

  13. SPIN DOCTOR Aug. 30, 2010 at 2:34 pm


    Nearly half of the US population has nil or insufficient life coverage. Here are some common reasons why:

    People feel there’s no need to cover themselves
    at the current stage of their life

    Uncertainty as to which insurer to use

    Confusion as to how it works

    Not being bothered


    Being afraid of the exam

    Postponing the necessity

    Not knowing how much to insure for


  14. lauch Aug. 30, 2010 at 2:40 pm

    Life insurance may make sense for people with a family depending on their income. It makes no sense for people not in that situtation. I’m sure there’s not a perfect match-up between the 1/3rd who don’t have it and those who don’t need it, but my guess is there are far more people in the other category, who do have it and shouldn’t.

  15. BOB Aug. 30, 2010 at 2:55 pm

    upon preamture death, You can instantly create substantially large sums of money that can be used to live on, eat, pay rent/mortgage, tuition and invest for needs later on in family’s life,

    Usually selfish people NIX the idea of paying pennies on the dollar for HUGE benefits. One million dollars of life insurance costs $750 per year for a reasonablely healthy 30 year old for 10 years.

  16. Joe Advisor Aug. 30, 2010 at 3:28 pm

    I agree that life insurance is not for everyone, but to generalize that nobody needs it is terrible. I have seen first hand how a proper policy has helped a family surive the financial stress of losing the primary bread winner. I have also seen a family that said life insurance was not necessary and lose their home after the father was killed by a drunk driver. A very general rule of thumb is to have enough insurance to make sure that those that depend on you have enough income to survive for a predetermined amount of time. That time period might be a few months or a lifetime. That is up to you to decide. If you have never experienced someone you know dying before their time, consider yourself lucky. But guesss what? It happens everyday. If you can afford cable or satelite TV, you can afford to protect the people that count on you.

  17. Katie Aug. 30, 2010 at 3:29 pm

    Anyone who has children but no life insurance is both stupid and selfish. This articles says that 7 out of 10 families with children would have financial stresses if one of the spouses died without life insurance. I’m a preacher’s kid. Growing up, I watched too many young widows who were forced to move their children out of the family home because their husbands died without insurance — or without enough insurance.

  18. Laura Aug. 30, 2010 at 5:23 pm

    My father died at the age of 48 leaving my mother with 3 daughters under the age of 15. Had he not had a policy for $100,000 we would have been broke. Anyone with children MUST have life insurance. EVERYONE DIES that is a fact and it’s the responsibility as a spouse and parent to take care of your family even after you’re dead.

    Wake up people if you have a family and love them then buy life insurance before it’s too late. Cut down on all the money you spend on non-necessities and show some concern for your loved ones. No one knows how long they have to live and your day to die could be tomorrow. Is your family properly protected?

  19. john Aug. 31, 2010 at 11:04 a.m.


  20. SPIN DOCTOR Sep. 2, 2010 at 6:39 pm

    it won,t pay out till I die, if ever?

    Let me think about it….

    Hell no!