4 in 10 Americans cut their insurance coverage and regretted it

Consumers who cut insurance coverage most often cut or terminate health insurance, followed by auto and dental coverage.

In the past year, 39% of Americans have reduced or removed insurance, according to the latest survey from ValuePenguin. Most of them – 45% – wanted to save money, while 29% just couldn’t afford the cost of the coverage. While a large percentage of people would use their insurance savings to pay for necessities such as groceries and housing, 63% of Americans regret reducing or eliminating their insurance coverage.

Data from over 1,000 respondents indicates that people generally do not want to reduce their insurance coverage. Seventy-five percent of people cut spending in other areas before cutting insurance. And most people see their insurance cuts as temporary. More than half – 52% – of people plan to reinstate the cuts they made to their insurance plans.

Main conclusions

  • Nearly four in 10 Americans cut insurance coverage in 2020, mostly to save money. This number rises to 65% of people made redundant or on leave due to the coronavirus pandemic.
  • Medicare was the most common policy for which consumers reduced coverage or eliminated it altogether, followed by auto insurance and dental insurance.. Forty-two percent of women who removed or reduced their insurance coverage said they couldn’t afford it, compared to 23% of men.
  • Among those who have removed or reduced their insurance, most spend this money on groceries (27%), savings (23%) and debt (21%), as well as monthly housing costs (15%).

  • Sixty-three percent of those who cut insurance coverage in 2020 regretted doing so, and more than half plan to restore their level of coverage at some point in the future.
  • While insurance is expensive (about one in five said they spend $ 500 or more on monthly premiums), not having insurance can also be expensive.. For example, 58% of respondents do not have dental insurance, which means they could face a big bill in a dental emergency.

More than a third of Americans removed insurance policy in 2020, but people unemployed due to COVID-19 were much more likely to kick coverage

Thirty-five percent of respondents have completely phased out at least one policy this year, while 31% have reduced coverage. The main reason consumers cut or cut insurance coverage was to save money. Forty-five percent made their decisions with this goal in mind. Likewise, 29% who reduced their insurance could no longer afford the policy.

Consumers who lost their jobs or were put on leave due to the pandemic were much more likely to cut their insurance. While only 15% of those whose jobs were not affected by the pandemic cut some form of insurance coverage, 59% of Americans who lost their jobs or were put on leave completely eliminated at least a type of blanket. Fifty-six percent cut coverage after losing their jobs due to the pandemic, compared to 13 percent who cut insurance but whose jobs were unaffected.

Compared to other forms of insurance, health and auto insurance were the most likely to be purchased by consumers. Indeed, health and auto insurance plans were the most likely to be phased out in the past year (although the latter was required in some form in every state). Forty percent of people who cut their insurance costs got rid of their health coverage, followed by 36% who cut their car insurance.

Home insurance was the exception to this pattern. While 42% of respondents had home insurance, only 14% of those who eliminated some form of coverage chose to forgo their home insurance. This may be because lenders can penalize homeowners who allow their maturity cover, and only tenants or those who have reimbursed their accommodation could do without this type of insurance.

Among respondents who chose to partially reduce their levels of insurance coverage or eliminate additions for at least one type of policy in the past year, health and auto insurance policies recorded the highest percentages. high reductions. Of those who cut some form of insurance, 43% cut their health coverage and 42% their car insurance.

How many people are eliminating insurance coverage

More than 6 in 10 regret reducing or eliminating their insurance, even if the money is used for necessary expenses

Sixty-three percent of consumers who reduced or canceled some form of insurance regretted it. In fact, when it comes to deciding how to cut costs, most policyholders have not considered reducing their insurance as their first option. Three-quarters of those who removed or reduced an insurance policy to save money said they reduced their other expenses before insurance.

More than a quarter of people who cut or canceled their insurance invested that money in groceries.

Twenty-seven percent of people who cut their insurance coverage use their savings to pay for groceries. Consumers were also likely to boost their savings with their extra cash, with 23% using their money this way. Similarly, 21% said their insurance savings helped them pay off their debts, while 15% spent their money on housing.

Races 27% 33% 23%
Savings 23% 15% 28%
Pay off the debt 21% 23% 21%
Monthly housing costs 15% 17% 13%
Child care expenses seven% seven% 6%
Purchases 5% 2% 8%
Dine outside 1% 1% 1%
To travel 1% 1% 0%
Other 1% 1% 0%

While most consumers distributed their insurance savings in this way, poorer households were much more likely to prioritize food and shelter, often at the expense of contributing to their savings. Only 15% of residents earning less than $ 50,000 who reduced their insurance used that money to save, on average.

On average, 33% of these respondents used their insurance savings to pay for their groceries. Thirty-nine percent of households earning less than $ 25,000 per year, which is less than the federal poverty level for families of four or more – who cut their insurance were likely to spend that money on groceries.

Conversely, those who lost their jobs or were put on leave due to COVID-19 were more likely to pay off their debt and housing with the money they saved by reducing their insurance coverage. A quarter of these people used the money to pay off their debts, while 20% used the money for housing costs.

More than half plan to reinstate their reduced or removed policies in the future, but the poorest households were the most likely to say they would not

In addition to the 52% who plan to reinstate their reduced policies, 38% said they could. This means that only 10% would not replenish their insurance. However, the uncertainty increases dramatically for the poorest households, as only 35% of households earning less than $ 25,000 would commit to reinstating their policies, and 19% would not.

Whether a policyholder has reduced or deleted their insurance policy, most would prefer not to. When asked which insurance policy they would remove if they had to cut costs, 26% responded that they would not take any policies under any circumstances. This response had the highest proportion of respondents.

Beyond that, 15% of people were receptive to getting rid of their dental insurance and 14% would get rid of their health insurance. Twelve percent were willing to reduce their car insurance. Conversely, 46% of consumers identified their health insurance as the last thing they would cancel if they needed to cut costs, cutting it only as a last resort.

Most important and least important types of insurance coverage

It may be tempting for some to reduce their insurance to save money, but this is probably not a good idea for most people. ValuePenguin has found that nearly one in five people spend $ 500 or more per month on their insurance premiums, which translates to at least $ 6,000 per year.

How to find more affordable insurance

  • Compare the cost of coverage offered by several insurers

  • Find out if you are eligible for a public insurance option, such as Medicaid or Medicare

  • Check discounts, which are offered by insurers for a range of insureds
  • Make sure you’re not paying for more coverage than you need

This number can represent a considerable expense for many Americans, especially those with a household income of less than $ 50,000 per year. For these people, the cost of insurance can represent more than 10% of their income. However, the cost of not having insurance can also be expensive – possibly more expensive if a person had to cover an unforeseen expense on their own.

For example, one in four people do not have health insurance. Inpatient care in hospitals in the United States can costs thousands of dollars per day depending on the state. At the same time, avoiding necessary care could lead to chronic health problems in the future, further aggravating the costs for which patients would be responsible.

Methodology

ValuePenguin commissioned Qualtrics to conduct an online survey of 1,023 Americans, with the sample base proportionate to represent the overall population. The survey was conducted from December 9 to 11, 2020.

We have defined the generations as the following ages in 2020:

  • Generation Z: 18 to 23 years old

  • Millennial: 24 to 39

  • Generation X: 40 to 54

  • Baby boomers: 55 to 74

The survey also included responses from the silent generation (75 and over). However, their responses were not included in the generational distributions due to the small sample size in this age group.


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Justin D. O'Neill