Protection gap is widening

SEP 16, 2012
Just as the markets plummeted amid the recession, so did life insurance coverage among American families. In 2010, families whose primary breadwinner was under 55 had $32 in net assets and life insurance in place for every $100 of protection needed, which is down from $46 in 2001, according to data from The Swiss Re Group. In aggregate, the protection gap for American families headed by primary earners under 55 totaled $20 trillion, up from $18 trillion in 2001. “Mortality protection is lacking in many American families, and the growing protection gap is a worrisome trend for individuals and society alike,” said Milka Kirova, a senior economist at Swiss Re. Ms. Kirova, who co-wrote the report, pointed to a number of factors behind the widening of the coverage gap. The two recessions that occurred during the first decade of the 21st century eroded the average annual income for households run by earners under 55. That cohort saw a 12% decline in average annual income between 2001 and 2010, slumping to about $100,000. Further, lower investment returns, rising levels of debt and a decline in average available financial assets have also left households with less to go around — and less money for life insurance, as coverage for households headed by those under 55 declined by 25% in 2010 from 2001, according to Swiss Re. Consumers have also pointed to a lack of affordability and a host of other financial priorities as the reasons behind deciding not to buy more life insurance. “The contraction in the number of households with life insurance not only reflects the financial pressures of tight family budgets and the decline of employer-provided coverage due to cuts in employee benefit packages but also the relatively low priority consumers attribute to life insurance, versus other financial needs,” according to The Swiss Re report.

Latest News

RIA moves: True North adds $353M California RIA as SageView grows North Carolina presence
RIA moves: True North adds $353M California RIA as SageView grows North Carolina presence

Plus, a $400 million Commonwealth team departs to launch an independent family-run RIA in the East Bay area.

Blue Owl Capital, Voya strike private market partnership for retirement plans
Blue Owl Capital, Voya strike private market partnership for retirement plans

The collaboration will focus initially on strategies within collective investment trusts in DC plans, with plans to expand to other retirement-focused private investment solutions.

Top Commonwealth advisor to recruiters: Stop with the cold calls already!
Top Commonwealth advisor to recruiters: Stop with the cold calls already!

“I respectfully request that all recruiters for other BDs discontinue their efforts to contact me," writes Thomas Bartholomew.

Why AI notetakers alone can't fix 'broken' advisor meetings
Why AI notetakers alone can't fix 'broken' advisor meetings

Wealth tech veteran Aaron Klein speaks out against the "misery" of client meetings, why advisors' communication skills don't always help, and AI's potential to make bad meetings "100 times better."

Morgan Stanley, Goldman, Wells Fargo to settle Archegos trades lawsuit
Morgan Stanley, Goldman, Wells Fargo to settle Archegos trades lawsuit

The proposed $120 million settlement would close the book on a legal challenge alleging the Wall Street banks failed to disclose crucial conflicts of interest to investors.

SPONSORED How advisors can build for high-net-worth complexity

Orion's Tom Wilson on delivering coordinated, high-touch service in a world where returns alone no longer set you apart.

SPONSORED RILAs bring stability, growth during volatile markets

Barely a decade old, registered index-linked annuities have quickly surged in popularity, thanks to their unique blend of protection and growth potential—an appealing option for investors looking to chart a steadier course through today's choppy market waters, says Myles Lambert, Brighthouse Financial.