Why don't you have life insurance?

By Barbara Marquand on May 9th, 2012

A big reason many Americans don't have life insurance is carriers haven't asked them to purchase coverage, according to a new survey by Deloitte.

The study shows insurance companies have a long way to go to improve outreach to consumers. Life insurance ownership is now at a 50-year low. Fifty-six percent of U.S. households don't have individual life insurance, and 30 percent have no life insurance coverage at all, according to LIMRA, a global research and consulting group that tracks the life insurance industry.

Deloitte's study found that many consumers consider life insurance important. Forty-five percent of people who haven't bought coverage and 70 percent who have coverage include life insurance among their top five financial priorities.

Yet many survey respondents are unfamiliar with the broader roles and benefits of permanent life insurance as a long-term financial planning solution. Less than half are aware of how life insurance can help them save for financial emergencies, pay for children's college expenses, save for retirement or increase the value of their estates.

The survey highlighted other gaps in consumers' knowledge about life insurance.

"A significant number of respondents frankly don't know if they need more insurance -- or if they do, they don't know how much they might need to buy," Sam Friedman, insurance leader for Deloitte Research, said in a press statement. "Still others say they want life insurance but cannot afford it -- leaving open the question as to whether these cost-conscious prospects might in fact purchase a policy if they realized what the price and value for coverage might actually be."

A recent study by LIMRA and The LIFE Foundation found that consumers on average overestimate the cost of term life insurance by almost three times. The average cost of a $250,000 level-premium term life policy for a healthy 30-year-old is about $150 a year. Consumers on average estimated the cost of such a policy at $400 annually. Younger people overestimated the premium by almost seven times the actual cost.

Deloitte researchers found five key factors explain why uninsured people haven't bought life insurance:

  • Don't see a need for it
  • Think it's too expensive
  • Lack knowledge about life insurance
  • Mistrust insurers
  • Find the process inconvenient

One-third of respondents say they lack coverage because no one had offered to sell them a policy, and 26 percent say the buying process is too difficult.

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