Fewer Americans are buying life insurance. Here's when you might need it

cnbc.com:

Fewer Americans are buying life insurance than in the past, which suggests households may be at financial risk in the event of an unexpected death, experts said.

About half, 52%, of consumers had a life insurance policy in January 2023, down from 63% in 2011, according to a poll by Limra, an insurance industry trade group.

Data from the National Association of Insurance Commissioners, a group of state insurance regulators, shows a similar trend: By 2019, coverage had fallen to 59% of households from 69% in 1998.

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«It's absolutely clear to me there's a very large gap here,» said Scott Shapiro, U.S. insurance sector leader at KPMG. «There's a literal protection gap where Americans are flat-out underinsured.»

The main purpose of life insurance is to provide financial security for loved ones if the policyholder dies. At that point, beneficiaries receive a death benefit (which is generally tax-free).

That makes it «kind of a funny product: It's something we buy and hope to never have to use,» said Matt Knoll, a certified financial planner based in Moline, Illinois.

Many Americans fail to plan ahead for their mortality, neglecting to draft wills, put a power of attorney in place or designate beneficiaries for financial accounts.

Overall, the share of households with life insurance has «steadily» decreased since the early 1970s, according to the NAIC.

There are likely many reasons for that drop-off.

For one, younger generations are deferring big financial and life milestones like getting married, buying a home and having kids relative to older