Life Insurance Industry Says Americans Today Are Inadequately Insured

Many Americans do not have nearly enough life insurance to support their families’ needs. In fact, about 44% of families say they would face financial hardship in six months if the primary wage earner were to die, noted David Levenson, president and CEO of LL Global, in a recent video presentation. Now, a group of life insurance organizations is aiming to change that.



Key Takeaways

  • A new life insurance industry initiative is aiming to make sure Americans are adequately insured.
  • Currently, about 60 million American households are either underinsured or uninsured, industry experts say.
  • Only 54% of Americans have life insurance coverage, down from 63% a decade ago.
  • About 44% of families say they would face financial hardship in the next six months if their primary wage earner were to die.

Focusing on the Insured but Underinsured

LL Global, the parent organization of life insurance researcher LIMRA and LOMA, is helping lead an effort with industry trade associations and more than 60 of their largest member companies and distribution partners to close the life insurance coverage gap. One initiative is encouraging financial professionals to engage with their existing clients to look at the adequacy of their protection.

“Most people think it’s just to pay for funeral expenses; but the word ‘life insurance’ is really a misnomer," Elsie Theodore, a Virginia-based regional vice president of Primerica, told Investopedia.. "Can anyone really insure someone’s life? No, ‘life insurance’ is really income replacement. Its purpose is to replace the income of the breadwinners in the household.”

As a general rule, she added, “When you are trying to determine how much coverage you should have, you must first look at your annual income then multiply by 10. You make $100,000 a year, your life insurance should be at least $1 million.”

A major problem today, Theodore noted, is that many people rely solely on the group life insurance provided by their employer, which is often inadequate.

Why Are Americans Underinsured?

According LIMRA’s research, about 60 million American households don’t have the proper protection for their families, with an average deficiency of $200,000.

What's more, the problem is worse than it was in the past. While 63% of Americans had life insurance coverage a decade ago, that number had dropped to 54% by 2020, LIMRA says.

“There are a lot of contributing factors to the incomplete coverage, including changes in individual life
distribution, employment-based benefits, worker participation rates, family and household make-up, and population demographics," a LIMRA spokesperson said. “People also have competing financial priorities."

In addition, there are “misconceptions about price point, need, and ease of purchasing, particularly among Millennials,” a Prudential Financial spokeswoman told Investopedia.

The Pandemic Has Helped Drive Demand

As LIMRA points out, the COVID-19 pandemic has highlighted the fragility of life and focused more Americans on the role of life insurance.

Theodore recounted one particularly sad situation: "After a few attempts to get this one client to sit with me and get her plan started, she called me because she had 13 members of her family die from COVID-19 and not a single one had insurance. That was an unfortunate wake-up call.”

The life insurance industry has also responded to the pandemic by adapting its sales practices. Companies have “made significant advancements in the ability to deliver a fully digital purchase experience so consumers can choose to buy a policy when, how, and where they want,” the
Prudential spokeswoman noted.

The life insurance trade associations that have joined the initiative with LL Global are the American Council of Life Insurers, Finseca, Life Happens, Million Dollar Round Table, National Association of Insurance and Financial Advisors, and National Association of Independent Life Brokerage Agencies.

To learn more about their initiative, visit Help Protect Our Families.

Article Sources

  1. LIMRA Research. "Closing the Life Insurance Coverage Gap." Accessed Feb. 5, 2021.

  2. LIMRA Research. "Industry Associations Unite to Help Address the Life Insurance Coverage Gap in the United States." Accessed Feb. 5, 2021.

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