Posted : 01/25/2012
Although the thought of loved ones struggling financially after your death is unbearable, somehow you never get around to buying life insurance.
Join the club.
Ownership of individual life insurance is at a 50-year low, with only 44 percent of households having individual coverage. A troubling 30 percent of households have no life insurance at all, compared to 22 percent in 2004, according to a 2010 study by LIMRA, a global research and consulting firm that tracks the life insurance industry.
The need for life insurance hasn't declined.
"Seven out of 10 families with children under 18 would be in jeopardy if the primary wage earner died," LIMRA spokesperson Catherine Theroux says. "But most people think, 'It won't happen to me.'"
Theroux knows that's not the case -- her father died when she was 19. Fortunately, he had life insurance, so her mom was able to maintain the family home and she and her siblings were able to continue their education.
Why are today's numbers down?
Never put off till tomorrow…
"It kind of boils down to procrastination," says Marvin Feldman, president and CEO of the Life and Health Insurance Foundation for Education (LIFE).
A lot of people say they need life insurance, he says, but don't follow through and purchase it. Another study by LIMRA and LIFE conducted this year found 86 percent of consumers agree most people need life insurance, but only 63 percent surveyed say they own some sort of life insurance.
Many people put off the purchase because they're confused. In another 2011 LIMRA study, half of consumers who said they were likely to buy life insurance in the next year were stalling because they didn't know how much to buy or what type to buy.
"They're so obsessed with making the right decision, they make no decision," Theroux says.
Some people rely solely on employer-sponsored group life insurance coverage, another factor that might be driving the downward trend. The problem with relying on group life insurance is the coverage typically ends if you quit your job or are laid off. In addition, most employer-sponsored life insurance is for relatively small amounts, not enough to cover most families' long-term needs.
The tough economy also has taken a toll on life insurance policy sales.
The top reasons people delay buying life insurance are because they don't think they can afford it and have other financial priorities, LIMRA research shows.
Life insurance can be cheaper than you might think
"But term life insurance is very affordable," Theroux says. A 30-year-old in good health can find affordable life insurance quotes and can buy a term life policy for the cost of a Starbucks latte a week, she adds.
Unlike permanent life insurance, such as whole life or universal life, term life has no accompanying savings account. It pays the death benefit only if the policyholder dies within the term.
Still, you can't place all the blame on the economy. The rate of individual life insurance ownership has been falling since 1960, according to LIMRA.
The life insurance industry is working on a number of fronts to reverse that trend.
"We as an industry need to do a better job of educating what insurance does and how it works and build trust and confidence back into the industry," Feldman says.
That's not a cinch. Public trust in all financial services, including insurance, fell after the U.S. banking crisis in 2008, Feldman says.
The LIFE Foundation conducts national consumer education campaigns and provides information about life insurance on its website.
Some life insurance companies are getting the word out through social media. Massachusetts Life Insurance Company (MassMutual) launched a new "Why life insurance?" campaign on Facebook with videos featuring children talking about life insurance, links to resources and a platform for discussing financial decisions.
Companies that sell multiple lines of insurance, such as State Farm and Allstate, are working to let consumers know their car and home insurance agents also sell life insurance. Although most multi-line companies offer life insurance, only 48 percent of consumers are aware they can buy life insurance from them, according to a LIMRA study released in November 2011.
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