Life Insurance Coverage Dies off amid Downturn

Article excerpt

Not everyone needs life insurance, despite what some salespeople may tell you. But too many people who do need those policies, namely parents of minor children, often go without.

The number of consumers going without any life insurance at all is on the rise. Thirty percent of U.S. households don't have coverage, compared with 22 percent six years ago, according to a recent survey by LIMRA, an industry-supported research group. Among those going without: 11 million families with children younger than 18.

The number of American households with an individual policy purchased outside any workplace coverage -- about four out of 10 -- is at the lowest level in 50 years.

The reasons behind the dwindling interest are varied. A tight budget is one reason. Forty percent of those polled by LIMRA said they had priorities other than insurance for limited dollars, including saving for retirement or paying off debt. And insurance industry experts say it's hard for people to see the value of a product that won't kick in until they're dead.

This occurs as some products are cheaper than ever. Take term life policies, which provide coverage for a specific period. The cost of these policies has dropped because people are living longer and insurers have been able to lower their administrative costs with technology.

In the early 1990s, a 40-year-old man in perfect health would pay an annual premium of $995 for a 20-year term policy with $500,000 of coverage, said Byron Udell, founder of AccuQuote, an online insurance broker. Today, the cost is $360 a year.

Some of those uninsured have made the right financial choice. But some of them could be putting their progeny at risk. The loss of a breadwinner takes a significant financial toll on survivors. And unless your family members have plenty of other assets to rely on, life insurance is an easy way to protect them.

Anyone who has a spouse, children or others who are dependent on their income needs life insurance.

Stay-at-home parents need coverage, although not as much as the breadwinner. The insurance would provide the family with income if the working parent needed to take time off the job after the main caregiver's death. And the insurance proceeds would help pay for day care when the parent returned to work.

Those with large estates also can use life insurance to pay estate taxes at death that could erode inheritances, said Brian Ashe, treasurer of the Life and Health Insurance Foundation for Education, an industry-supported education group. …