Half of America's households (about 58 million) claim to be underinsured when it comes to life insurance, according to a new study from LIMRA. In fact, there's as much as $17.5 trillion in untapped sales potential for the life insurance market.
With life insurance ownership at a historic low, the opportunity in the industry has nearly doubled since a similar study was conducted in 2004. At that time, LIMRA estimated life insurance sales could increase $9.5 trillion if the 48 million households claiming to be underinsured purchased the coverage they said was needed.
"The underinsured life insurance market offers financial professionals tremendous opportunity, with 35 million underinsured middle market households in total—half of them (17 million) thinking they might be ready to buy life insurance in the next year," says Cheryl Retzloff, senior research director, LIMRA Markets Research .
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And there are more Generation X households thinking of buying life insurance in the next year than Generations Y and Baby Boomers. Since three quarters of Gen X households are married and half have a child under 18 living in the household, this makes them prime candidates for life insurance, LIMRA reports. While the likelihood to buy life insurance does not vary by income level, there are more than double the number of U.S. households making $35,000 to $99,900 (17 million) that are likely to buy life insurance than those more affluent.
"The greatest challenge is not getting them to understand they need life insurance, but rather getting them to give it a high enough priority to investigate coverage now," Retzloff says. "These consumers need to help to decide what type to buy, how much coverage they need and how life insurance can play an important role in their overall financial security."
LIMRA says there are three main factors preventing consumers from purchasing the life insurance they feel they need: money, lack of knowledge regarding what and how much to buy and simple procrastination. On the other side, Americans mostly buy life insurance to pay burial and other final expenses, to replace the income of primary wage earners, or to pay off the mortgage.
Also, the study noted that 24 percent of consumers shopped for life insurance because a financial adviser initiated and suggested a need for it, while a quarter of those underinsured claimed never to have been approached about life insurance.
To get the numbers, LIMRA calculated the size of the underinsured market based on two different measures: the number of U.S. households that readily admit they are underinsured, and the number of households that think they might buy life insurance in the next 12 months. LIMRA measured the gap between the amount of life insurance these people think most consumers should own and what they actually own.
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