For every one of the jumbo life insurance cases sold today, there are hundreds if not thousands of households in critical need of a $100,000-$250,000 life policy.
A recent LIMRA study showed that 68% of adults in the United States are covered by life insurance. So, the remaining 32% have no life insurance at all. Among the haves, 33% only own group insurance obtained at work, typically covering 1 to 3 times salary, the study says.
A 2002 MetLife study suggests the situation is even worse. It too found that 68% of adults are covered by life insurance, but it also found that ownership among the "Prime Needs Segment"–individuals with full-time jobs and dependents (spouse and/or children under 18)–was only 64%. The study also showed that 58% of Prime Needs households had life insurance equal to less than 3 times annual household income. In fact, only 27% of these households had potentially adequate coverage of 5+ times annual household income. Bottom line: Only about 17% of these households may have adequate life insurance.
Census bureau projections for 2010 point to 32 million households with children, so there are likely over 25 million U.S. households in need of more life insurance. The 2005 census data indicates that 60% of those households have income ranging from $25,000-$100,000.
Many surveys have been published probing why people do not buy life insurance. Common responses include "confusion over which type to buy," "not a financial priority," "too expensive" or "uncertain about right amount of coverage."
Another challenge is that the traditional method of selling insurance through an agent is difficult because of the relatively low commission on a low face amount policy. Insurance companies have tried to make it easier to sell insurance at these face amounts by reducing the amount of underwriting, but then they have to contend with higher mortality rates.
Insurers have also tried to reach the mid-market by selling direct through the mail, and more recently via the internet, but with relatively small success. Life insurance still needs to be sold, and it is difficult to convince someone of the need without direct contact. The internet may become a bigger part of the answer, especially for computer savvy Generation-Xers and particularly as more people pay bills, transfer money to and from bank accounts, and buy stocks online.
Another method of reaching the mid-market is selling through the worksite, but this too has had relatively small success. A LIMRA study shows that worksite-sold life sales grew by over 10% from 2005 to 2006, but this distribution channel is still relatively small.
