According to the US Census bureau about 2.5 million people die every year in the United States. That’s from all causes and all ages. Assuming all days are equal that means that about 6850 people die every day in our country.
This is going to get a little deep with numbers here but I promise a clear synopsis in the end. There are about 314 million people in the US right now. A recent LIMRA study says that 52 million people who make between $50,000 and $250,000 in annual income don’t have any life insurance. Just with that figure alone using my math means that 1139 people in that income range die every day without life insurance. The Limra study also points out the another 28 million in that income range admit they don’t have adequate life insurance (because they bought whole life). So another 613 middle income people die every day without enough insurance to adequately take care of their family.
By the way. LIMRA used to stand for Life Insurance Marketing and Research Association. Now they says it stands for LIMRA. Go figure. I tried to nail down the obvious missing chunk of information which LIMRA didn’t provide, statistics for those making under $50,000 a year. Since LIMRA didn’t give any information about how many were adequately insured in middle America, and knowing there are more people making under $50,000 than between there and $250,000, for the sake of this post I’ve decided that there are 92 million making under $50,000 that don’t have life insurance and 38 million in that group who would admit they don’t have adequate insurance. That means in the low income families of America 2016 people die every day without life insurance and another 832 die without adequate insurance.
Before I go any further let me make it clear that this isn’t the insurance industry making up numbers to get people to buy more life insurance. These numbers are the result of an exhaustive study of people who told LIMRA that they didn’t have any life insurance or that, in their own opinion, they didn’t have enough life insurance. And one other thing. This post and LIMRA’s study isn’t about life insurance to make families wealthy. It’s about replacing the income that is suddenly and tragically lost.
So, moving on I found that something near 2% of the country make more than $250,000 a year. I was going to just leave them out, but just because they make more money doesn’t mean they aren’t normal. So, if my math is holding together that means that 137 people who make over $250,000 a year die every day without life insurance every day.
Now that I’ve covered the spectrum let’s take a look at the ugly truth. Keep in mind that life insurance is less expensive today than it has ever been…..ever. It might not be enough insurance to be “adequately insured”, but some insurance for just about everyone is cheap. Except for the poorest people I think it is fair to say that the cost of some life insurance, if not all the life insurance you need to be adequately insured, falls somewhere well within the range of the amount of money that people waste.
So, out of the 6850 people that die every day, 3292 die without any life insurance at all. Another 1445 die without adequate insurance by their own admission. So, 48% of people who die every day leave no life insurance benefits behind and another 21% don’t leave enough (their calculations, not LIMRA). So does that mean that 31% of Americans have adequate life insurance? I really doubt it. I think if LIMRA could pull off a study of all income ranges who claimed they had plenty of life insurance, the number would drop to 20% or below. My disclaimer is that I was good at math, but not that good. What I do know for a fact is that I talk to people every day who make up excuses to avoid buying life insurance. That’s just a fact.
My fellow Americans, ask not what you can do for yourself, but what you can do for your family! Even if my figures aren’t accurate, even if I’m off by 50%, that’s pathetic. LIMRA says the number one reason that so many people don’t have any life insurance at all is because they have never been asked whether they would like to look into it. Listen up America. Life insurance is family saving, intelligent planning kind of stuff. Would you like to hear more about it? Hello!!! Would you like to hear more ab0ut it?
Bottom line.Personally I don’t buy the not being asked excuse. Most of us blow way more money than we would ever need to buy life insurance. Read the paper if you still get one. How often does a person die in your community and there are donations for the family being accepted at a bank? People with life insurance proceeds don’t need charitable giving. The ones that have adequate life insurance are the obituaries where they say “don’t send flowers, donate to the American Cancer Society”. If you have any questions about what it takes to have some life insurance to cover your responsibilities or enough to cover all of them, call or email me directly. My name is Ed Hinerman. Let’s talk.
I know you don’t like whole life insurance, but here’s a question you left out: Out of the 6850 people that die each day, how many don’t even have funds on hand for burial or cremation? It happened in my family in March. Brother-in-law died at 55 after a brief illness and we all had to pitch in to bury him. And he was a homeowner, albeit with a mortgage debt, not a street urchin. He had no cash on hand, and not even a little $10,000 whole life policy.
Jim,
Sorry to hear about your brother in law. My prayers go out to his family.
You and I both know that whole life insurance, just because of the cost per thousand is one of the primary reasons for under insuring. But the question isn’t whole life versus term. Why did your brother in law die without life insurance?
My point is this: He likely would have been just as broke if he had died at 75, long after a large term policy would have served its purpose and lapsed. And there are tens of thousands of others like him. These are the people that need small whole life policies. Some of them stay broke their whole lives. Some of them lose their savings after retirement in every conceivable way from bad investments to worthless kids who have made costly grandchildren. Whole life is good, but it is oversold by the agents (face amounts) and people let their policies lapse. The key is to buy one that is small enough that YOU WILL NEVER LET IT LAPSE. Then it doubles or even triples in death benefit IF YOU LIVE TO BE OLD. Buy the big term policy for IN CASE YOU DIE YOUNG.
Or convert part of the term.
My point and the point of the LIMRA study is why your brother in law didn’t have any life insurance?
If it’s not something you want to talk about I understand, but I think it helps all life insurance agents serve better if they understand why people don’t want to buy life insurance.
Thanks for your input. I will concede to you that I would rather see someone die with a small whole life policy than nothing at all, but the study says that 52 million people making $50k-$250k don’t have life insurance at all. They should have large term policies and a small whole life or no lapse UL.
I’m in total agreement with you, Ed. Practically everyone should have life insurance coverage, and a very small amount should be permanent. Since few competitive UL companies will write for less than $50,000, that leaves whole life. And it is a widely misunderstood financial instrument. At the age of 24 and fresh out of college I was visited in my office by a man who purported himself to be a financial advisor. He advised me to buy a $100,000 whole life policy from Provident Mutual that I did not even have the $1024 to pay the first premium with. Not to worry, the company would loan me the first year’s premium and I would not have to pay anything until the first anniversary. At the first anniversary I was still broke and had to lapse the policy and pay the agent $92.84 per month over the period of a year. I had a bad opinion of whole life for 25 years because of that abuse. But that’s what typical whole life agents do, they oversell. And the companies go along with it because it’s all profit when the policy lapses. Big term, small WL.
By reading both you`re conversation here, I agree that I would rather see someone pass away with a small insurance policy instead of none. But I have one question about life insurances. I know that whole life, term, or UL have their own reasons. Judging by the majority of people in today`s generation, almost 75 percent or more are middle income earners. If you are in my situation as a financial advisor, what kind of life insurance policy would you recommend please send me a message in my email
Keith,
I am convinced that probably 95% of life insurance should be term. The truth is that most of our needs are temporary, not permanent. Our children grow up and leave. No need to carry insurance for them then. We pay off debt. No need to cover that once it’s paid. The older we get the less insurance we need simply because we aren’t covering income earning years. And on and on. Final expenses and estate taxes are the only really good reason for permanent in my opinion. Thanks for your comment.
Dear Ed,
One thing that I’ve been trying to figure out is what is the percentage of people that actually use death proceeds that are preferred NT or higher? The way I look at it, if the insurance companies were paying out death proceeds all the time, they wouldn’t be in business. So, they have calculated a favorable risk that benefits them. Kind of like a casino that knows that I could win lots of money, but in the long run they will always come ahead because the numbers are tipped in their favor. Thus, I don’t gamble.
Given that I’m a preferred non-smoker, it seems that they know my chance of dieing before my policy ends is pretty low, so they’re willing to take my money knowing that I have a very low probability of my beneficiary cashing out the death proceeds.
Can you please tell me where my logic is wrong and why I should get life insurance knowing that I’m healthy and have a very low likelihood of dieing before my policy ends?
Thanks,
Jae
Dear Ed,
I truly appreciate you taking the time to answer my question. So, thank you! Please oblige me a bit further if you have the patience and time.
In general, I distrust insurance companies since they play on our fears and if they can wiggle out of paying for something they will. I hope life insurance is different.
Perhaps using the casino analogy wasn’t the best to use, but I feel where casinos try to reel you in with a veil of hope, insurance companies try to reel you in with a veil of fear. Who’s being irresponsible? At least it’s common knowledge that casinos are run on the basis that we will lose and while they’re not advertising that fact, at least we all know it. Life insurance companies need to provide the statistics of how many people actually use insurance rather than prey on factors unknown to us and make us think that we could die at any moment. Which of course is true, so it’s hard to argue against it.
You said term policies in all rate classes, 3% actually pay death benefits. Probably even lower than with people with a preNT or super preNT. What if that percent is around 1% or less? Would I really be gambling by not getting life insurance if my chance of dieing during my 30 year policy is less than 1%? Heck, a 3% chance of my family using my death proceeds is even so low that I don’t think I would be gambling very much. But, you and many others tell me that I’m being irresponsible for not paying into that 3%. Is that really true, or have you and everyone else been so steeped in fear of an early untimely death that 3% is enough for you to believe that it’s worth it? What if we all knew what the real statistics are? How many people would still buy into it? Of course, everyone’s comfort level is different and perhaps betting that I have a 97% chance of surviving beyond my policy is enough for me.
Again, I’m really playing devil’s advocate and I’m not trying to raise anyone’s blood pressure. I just have questions that no one up till now has been willing to answer, or had answers to.
Sincerest of thanks!
Jae
Jae,
Your questions are great. Thank you.
Your distrust of life insurance companies is not completely without justification but let me break it into two parts. I do a lot of work on behalf of beneficiaries of policies who, call it what it is, get screwed out of a death benefit by companies that have no business being in the business. There are legitimate reasons for claims to be denied, but AARP/New York Life for instance, seems to make a regular practice out of trying to bluff the beneficiary into believing the claim shouldn’t be paid. In fairness to the industry, this a very small percentage of companies and likely a very small percentage of their claims.
The other side is now urban legend or myth in that the life insurance industry has a past that long ago was less than outstanding. The National Association of Insurance Commissioners has ferreted out and gotten rid of most of the problem companies.
There are companies that really play the fear factor in sales. Personally, and I think I speak for a lot of agents and companies, it’s wrong. Online agents like Intelliquote have been the source of plenty of life insurance sales revulsion for their morbid TV and magazine advertising. Your acknowledgement that any of us could die at any time simply leads right into what I think the conversation should be about, responsibility. In the blog that this tails on I was talking about how many people die each day. No fear factor. It’s just a fact and I think a lot of people don’t believe they are part of the statistics that the rest of us live in. Good reminder occasionally.
Are you likely to outlive your life insurance? Actually you are more likely to decide the money is better spent somewhere else and lapse it before you outlive it, but yes, plenty of people outlive their term insurance, and that’s a good thing. Well planned life insurance is only carried for a specific need and if you get past that need (children while they are growing up), you no longer need the insurance.
Jae, you walked away from the casino argument but you go right back to the gambling discussion. If you have a wife and/or children and aren’t carrying an adequate amount of life insurance to make sure they can get by in your absence, yes, I believe that is irresponsible. Even with less than a 1% chance that they will need it, yes, it is irresponsible. You are in affect saying that you don’t care about their future enough to pay a little out for term life insurance. If you drop it when you don’t need it, children grown, wife dies before you, everything is paid off and you have more liquid assets than life insurance, I’m on your side. If you don’t have any responsibilities right now and don’t need it, don’t buy it and I’m with you.
I don’t fear an untimely death and I don’t think you should either, but I have seen the aftermath of them with and without life insurance and they are decidedly different pictures and stories. Fearing and acknowledging the truth, which you’ve already done are different.
I’m not sure I’ve answered all your questions, but I invite you to call me out where I fall short. At this point it seems like they only thing really separating our thinking is the fact that while we both know you are likely to outlive your life insurance, you believe that’s a bad thing and I believe wholeheartedly that it is a good thing.
Ed,
Ultimately, I think the hardest thing I’ve learned is accepting life insurance as a built in cost for adulthood. To pay for something that is intrinsically designed to never payback, except in peace of mind. Even if I knew the real statistics, which I wish I did, I would probably still get life insurance.
So, thanks for talking me through a somewhat laborious and futile exercise. Your patience and follow through are highly admirable, especially to a complete stranger.
Happy Holidays and a here’s to a great 2013!
Jae
Jae,
Thanks for the give and take. I think you hit the nail on the head with it being kind of a foreign concept when we’re younger. All the best.
Jae,
It is important to have some type of life insurance policy because you don’t know how or when you will die. Even if you are in good health now that can change ie.. there are people I know that seemed to be perfectly healthy and then find out they have cancer and passaway 6months later.there are also some things worse than death ,you could develope any number of diseases that may not kill you but make it so that you will never be able to buy life ins. I’m not trying to scare anyone just sometimes people don’t realize how fragile and uncertain life really is! I sell life insurance and I run accross many excuses for why people don’t want to buy. The biggest one is ” can’t afford it”,” I have it through work”, ” not right now”. It is sad to say that sometimes I am unable to over come their objections and they don’t buy. These people are very selfish.. because instead of putting family tfirst they are thinking hoe that $20 or $30 will cut into going out money.. etc.
Jae,
It’s not a matter of scaring clients but rather helping them to see reality. Back when I used to sit in the living room with couples I would ask the husband to be quiet for 5 minutes while I talked with their wife. I would ask if she knew anyone who had died prematurely and the answer is never no. I would then ask her, in the absence of looking at or talking with her husband, what life would be like if he weren’t there tomorrow.
The acceptance of mortality is a tough one. When you stack life insurance up against dinner out once a month, life insurance loses. When you can get them to talk about not just going without dinner once a month, but the wife raising the children without his income, dinner once a month becomes the greedy excuse that it is.