American workers have gotten so used to getting free life insurance coverage as a benefit through their jobs that a growing number of them - especially young workers who have delayed starting families - aren't bothering to go through the hassle and expense of purchasing individual policies.
For the first time in history, more Americans are covered by employer-based group life insurance than by individual life insurance policies.
A study published by LIMRA, a trade organization for the insurance industry, found 108 million Americans have life insurance coverage through their workplace, compared with 102 million covered by individual life insurance.
This is the first time the number of people covered by workplace insurance has surpassed those covered by individual insurance since the organization began tracking U.S. life insurance ownership in 1960.
"To me, it's not about changing attitudes toward life insurance. Consumers value life insurance," said Anita Potter, assistant vice president for workplace benefits at LIMRA in Windsor, Connecticut. "What is changing more than anything else is where they are getting it."
At a time when many Americans fear outliving their retirement nest eggs more than the consequences of losing a primary breadwinner to an early death, many people see life insurance as a household expense that can be eliminated from the budget - especially if it comes down to a choice between that and giving up certain creature comforts many take for granted, such as cable TV.
A recent survey by Austin, Texas-based insuranceQuotes.com found 37 percent of adults do not have life insurance. The expense was the most commonly cited reason, with 59 percent of those without a policy claiming they couldn't afford it.
Such attitudes are rather alarming to those in the industry.
"Many adults, particularly millennials, believe that since they're currently healthy, they do not need life insurance," said Laura Adams, senior insurance analyst at insuranceQuotes. "But rather than being viewed as an expense, life insurance should be viewed as an investment as well as a safeguard for your spouse and children."
Those adults without a policy in the insuranceQuotes survey largely belonged to the millennial generation, between ages 18 and 29, were more likely to be single, had less than a college degree and earned less than $50,000. Those without a policy said they would rather spend the money on food and utilities, put it in savings, pay down debt on their car or student loan, or donate it to charity.
The 2016 LIMRA study is based on a sample of 4,167 households.
Etti Baranoff, a professor of insurance and finance at Virginia Commonwealth University, said the problem with employer-based life insurance is that it's not done based on a need analysis. It's usually an employee benefit that pays an employee a death benefit equal to his annual salary, or sometimes twice the salary.
When employers provide life insurance, it sends a message to the workforce that companies care about employees and their families. The company can usually deduct premiums for $50,000 of term insurance coverage as a business expense, and under federal law, no employee can be turned down for life insurance coverage as part of group underwriting.
Baranoff said demographics are an important force in driving the downward trend in life insurance policy ownership.
"Baby boomers used to be the largest generation and they are not buying life insurance," Baranoff said. "Their kids are older. They don't have a need. They are not buying insurance for their kids. Actually the kids may be earning more than the parents.
"Millennials don't have a need yet if they don't have a family. All they need is what the employer provides for burial expenses."
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