Individual Life Insurance Ownership Falls to 50-Year Low, LIMRA Says

Number of U.S. households with no life insurance is growing, other financial priorities cited

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 the life insurance lobbying and marketing organization, found that only 44% of U.S. households have individual life insurance. The number of U.S. households that have no life insurance whatsoever is growing. Today, 30% of households (35 million) have no life insurance coverage, compared to 22% of households in 2004. Among households with children under age 18, which LIMRA argues have the greatest need for life insurance, 11 million have no coverage.

"The numbers tell a grim story," said Robert Kerzner, CLU, ChFC, president and CEO of LIMRA, LOMA, and LL Global, in a statement. "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."

According to the study, more than 40% 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 everyday living expenses if the primary breadwinner died today. Another three in 10 would have trouble keeping up with expenses after several months.

Half of households feel they need more life insurance--the highest level ever. Moreover, 24% 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 bills and to maintain their lifestyle in the event of the primary wage-earner's death.

About one in four middle-market households admit they don't 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 U.S. households currently 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 in this manner. For instance, 60% 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.

Read a story about SEC and GAO report on life settlements from the archives of InvestmentAdvisor.com.

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