Nearly a third of U.S. households having no life insurance coverage, the highest percentage in more than four decades, according to a report from LIMRA, a financial services research and consulting organization. Separately, insurance provider MetLife found a significant gender gap in the amount of life insurance coverage among working parents.
About 30 percent of U.S. householders (around 35 million) neither own their own life insurance policies nor are covered under employer-sponsored plans, up from the 24 million, or 22 percent of households, without coverage in 2004, LIMRA found. Among households with children under age 18, which arguably have the greatest need for life insurance, 11 million have no coverage.
The decline in coverage was attributed to tight household budgets, loss of employer-provided coverage as a result of layoffs, and cutbacks by some employers in their benefits packages. The lack of insurance has left many Americans feeling vulnerable, LIMRA found. Among households with children under 18, four in 10 said they would have immediate trouble meeting everyday living expenses if the primary breadwinner died today. Three in 10 would have trouble keeping up with expenses after several months.
About one in four middle-market households admitted that they didn't know how to obtain or reach their financial goals, including buying life insurance, LIMRA found. One of the biggest obstacles: lack of information.
"The numbers tell a grim story," said LIMRA President and CEO Robert Kerzner. "A majority of families either have no life insurance or not enough. Whether they buy from an agent, get coverage through their employer or make an online purchase, the important thing is that they get the coverage they need to protect their loved ones."
Gender Imbalance in Coverage
Married men with minor children have, on average, five times their annual household income in life insurance coverage—if they have coverage. However, married women with minor children have, on average, only three times their annual household income in coverage, according to MetLife’s 8th Annual Study of Employee Benefits Trends, which surveyed U.S. employees during the fourth quarter of 2009.
This gender gap is noteworthy, as men and women express equal worry about the financial impact of their premature death on their families—six out of 10 fathers and mothers said they were very concerned.
"It’s concerning to see the income of working mothers is not as adequately protected as that of their male counterparts,” said Bill Raczko, senior vice president for U.S. business at MetLife.
"Many people overlook some important expenses that life insurance can help cover," added Steven Weisbart, senior vice president and chief economist at the Insurance Information Institute, an industry-supported nonprofit communications organization. "For example, the death of a working parent may not only terminate an income source but also a family’s source of health insurance, tuition assistance and other financial benefits."
Uninformed and Dissatisfied
MetLife found a gender imbalance regarding benefits information as well. Working, married women with children under the age of 18 were almost half as likely as working fathers to say that their employers’ benefits communications educated them effectively on their options—26 percent of mothers compared to 48 percent of fathers. In addition, only half as many working mothers as fathers consult with anyone about their personal financial matters.
In a related finding, only 38 percent of married women with dependent children, compared to 56 percent of their male counterparts, felt very satisfied with their workplace benefits.
“Employers can improve their group life insurance benefits programs through three things: evaluation, enhancement and employee education,” advised MetLife's Raczko, who pointed to a strong correlation among effective benefits communications, improved benefits satisfaction and improved job satisfaction.
Tips to Consider
Raczko offered the following tips to help employees evaluate their life insurance needs:
• Start at the workplace. Even if employees have to pay some or all of the premiums, obtaining coverage in the workplace has the advantages of group rates, limited or no medical underwriting, convenient payroll deduction and ease of enrollment.
• Supplement. Many employers allow their employees to purchase supplemental life insurance coverage at competitive group rates during the fall open enrollment season and often at additional times of the year. An insurance needs calculator can help employees to learn about the right amount of life insurance for their family’s needs.
• Encourage discussion with spouse/partner. Employees should consider not only their coverage needs but also those of their spouse or partner.
Additional tips for ensuring that employees understand and value life insurance benefits can be found in the related articles below.
Stephen Miller is an online editor/manager for SHRM.
Closing the Life Insurance Coverage Gap, SHRM Online Benefits Discipline, April 2010
Confronting the Gender Gap in Life Insurance Coverage, SHRM Online Benefits Discipline, September 2008
SHRM Online Benefits Discipline