Article Topics: survey: Nearly four of every 10 Americans don't have life insurance

Life insurance combines two topics many people would rather not think about: death and money. So, it’s no surprise to many experts that a large number of Americans either don’t have life insurance or don’t know the basics of their own policy.

A survey conducted online by Harris Interactive on behalf of found that a large number of U.S. adults (39 percent) don’t currently have life insurance – and among those who do, many (36 percent) acknowledge they don’t completely understand their policy.

Experts say a lack of financial savvy and misunderstandings about life insurance unite to keep Americans in the dark. But taking the time to get the facts and shop carefully for life insurance could pay off in the future.

Going without life insurance

life-insurance-americansAlmost four of 10 adults surveyed say they don’t have life insurance – and that number is even higher among certain groups of adults. “Some people probably don’t know they need life insurance, or they feel they can get by without it,” says Marv Feldman, president and CEO of the LIFE Foundation, a nonprofit group that promotes life insurance awareness.

So, who is most likely to go without life insurance? The survey, conducted in August 2012 among more than 2,000 U.S. adults 18 and older, found that people more likely to go without life insurance:

  • Are relatively young. 56 percent those in the 18-34 age group do not have life insurance, while 38 percent of those 35 to 54 and only 27 percent of those 55 and older do not.
  • Have never been married. 57 percent of adults who are single and never have been married and 42 percent of those who are divorced, widowed or separated do not have life insurance, while only 27 percent of married people do not.
  • Do not have a college degree. 43 percent of those without a college degree don't have life insurance, compared with 29 percent of college graduates or higher who don’t.
  • Make less money. 59 percent of those with annual household income of $35,000 or less go without life insurance, compared with only 23 percent of those with yearly household income of $75,000 or more.

Americans pass up life insurance for a variety of reasons, the survey found. The top reason, given by 45 percent of people who lack life insurance, is that it costs too much. Experts say some consumers, especially those making less than $35,000 a year, might have a hard time squeezing life insurance into their budgets.

But experts also say many people just don’t know that a term life insurance policy – which pays a set amount if the policyholder dies during a specific period of time – can be quite inexpensive. For example, the survey found that 46 percent of adults with life insurance who have purchased it on their own reported paying $50 or less per month on their premiums.

Certified financial planner Jeff Rose, who blogs at, points to the case of a 28-year-old pregnant wife who recently died, along with her baby. She didn't have life insurance.

“Now, along with the tragedy of losing his wife and daughter, the husband is left trying to figure out medical and funeral expenses,” says Rose, adding that friends and relatives are chipping in. “With cheap term life insurance – we’re talking $15 or $20 a month – that all could have been avoided.”

Aside from cost, other reasons that Americans gave for not having life insurance included that they haven’t even thought about it (23 percent), they don’t need it (20 percent), their spouse, partner or significant other has a policy (6 percent) or they have cashed out their policy (6 percent).

Life insurance expert Tony Steuer, author of “Questions and Answers on Life Insurance: the Life Insurance Toolbook,” says some people really don’t need life insurance. For example, he says single people who don't have children or other dependents might want to consider skipping it. “It’s insuring something you don’t have a need for yet,” Steuer says of buying a policy in that situation. “I might buy a Lamborghini someday, but I’m not going to go buy auto insurance for it now.”

Life insurance 101

For those who do need life insurance, though, just buying a policy isn’t enough, experts say. The survey found that many people who do have life insurance don’t understand their policies – and some might not have enough coverage.

The survey found that among people who do have life insurance:

  • Most don’t look at their coverage yearly. Of U.S. adults who bought their life insurance at least one year ago, 71 percent say they don’t review their coverage every year. And 77 percent of those 35 to 44 don’t do a yearly check.
  • Many appear to be underinsured. More than half (54 percent) of those who have life insurance reported having $100,000 or less in coverage, including 20 percent who have $25,000 or less.
  • Some aren’t sure what kind they have. Thirty percent of those who have life insurance say they aren’t sure what type of life insurance they have, whether they have term life insurance, whole life insurance – which stays in effect as long as premiums are paid and which accumulates a cash value – or another type of life insurance.
  • Some are not clear on cost. 13 percent of those who bought their own insurance say they don't know the amount of their monthly premium.
  • Some haven’t communicated well. Among those who have chosen beneficiaries, 10 percent say their beneficiaries don’t know they’ve been picked.

In general, a sizable number of consumers with life insurance don’t have a clear grasp of their policies. According to the survey, 36 percent of people with life insurance said they don’t completely understand their policies. But 49 percent of those age 18 to 34 said this, and 47 percent of those who are single or haven't been married and 41 percent of women agreed with that statement.

“It all goes back to a lack of basic financial literacy,” Steuer says.

Getting a grasp on life insurance

Life insurance experts say it’s important for all consumers to learn about life insurance and, if they need it, buy enough coverage. Here are some tips:

1. Get a life insurance overview. Steuer says consumers should take the time to educate themselves about life insurance – such as the different types available, how it works and general costs – before buying a policy.

2. Get an idea of your life insurance needs. Start by using an online calculator to estimate how much coverage you need, Feldman recommends. “Run your own numbers to determine what’s required for your situation today,” he says.

3. Get a quote. Get a quote online to get an idea of what you can expect to pay. Then, if you want further guidance, find a good licensed agent, Feldman recommends. You can start by asking family and friends who their agents or financial advisers are, he says. Steuer suggests using an independent agent who represents several life insurance companies.

4. Know your policy. At minimum, you should be aware of the type of policy, the premium and the death benefits, Steuer says.

5. Look at your life insurance regularly. “Definitely go back every year or two, evaluate what your needs are and make sure you have the optimal policy,” Steuer says.

Survey methodology

The survey was conducted online Aug. 15-17, 2012, among 2,192 U.S. adults age 18 and older.

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