The percentage of life insurance coverage in U.S. families is at its lowest in last fifty years. According to industry experts there are millions of households who are living without this safety net. As per the recent report published by LIMRA, there are only 44% of the families who hold an individual life insurance policy while 30% do not have employer offered or individual life insurance coverage. There are about 11 million homes with children below the age of 18 who live without any life insurance. They are considered as households with the maximum requirement for life insurance exposure.
To compile this report, LIMRA, an industry sponsored group, evaluated the underinsured market size based on two key features, the number homes in of U.S. who admit that they don’t have life insurance coverage and the number of families who are considering of buying life insurance in the coming year. LIMRA calculated the gap between the life insurance amount these two sections think consumers should have and what they actually possess.
It is strange but not surprising that this decrease in life insurance coverage is being seen at the time when the life insurance premiums are comparatively lower than ten years back. ING, a financial company selling life insurance, offers an example that a healthy man of 35 years can buy a 20-year term life insurance policy of $500,000, for a monthly premium of around $25.
A number of reasons can be responsible for the decline. Present economic downturn has played an important role. Over 40% of the households mentioned they have not bought life insurance as they have other financial commitments. Life insurance unlike mortgage and auto insurance is a voluntary option and many families put off buying it according to ING’s US life insurance department chief executive, Butch Britton.
The number of insurance agents has also declined with time. As per LIMRA about 80% of households don’t have a private life insurance agent. The key reason for fewer agents is the decrease in term life insurance premiums. It becomes tough for agents to make a living by selling life insurance policies.
LIMRA has reported that as compared to over 246,000 agents two decades back there were only 184,873 “affiliated agents” in 2010. Many of the life insurance agents in the business today try selling permanent life insurance policies to wealthy households. Permanent life insurance is costlier than term life insurance.
Several strategies are being adopted by insurance companies to reach out to households with middle-income who don’t have life insurance coverage.
