Nearly 40% of Americans reduced or eliminated a policy in 2020
Some 60% regretted the cost-cutting decision, and more than half plan to restore insurance coverage in the future.
Nearly four in 10 U.S. consumers said they reduced or eliminated insurance coverage this past year as a way to help save money, according to a ValuePenguin.com survey. The most common lines that saw reductions or were cut out completely were healthcare, auto policies and dental, respectively.
Slightly more than 30% reduced coverage, while 35% eliminated at least one policy in 2020, the survey revealed. Saving money was the main reason cited for doing so, while 29% reported an inability to afford coverage.
While some Americans felt they had no choice but to reduce or eliminate coverage, slightly more than a quarter of survey respondents said they would never consider such measures. Of those that cut coverage in the past year, 63% said they regret the decision, and more than half plan to restore coverage in the future.
The unemployment situation did play a role in these numbers, as 65% of those that were laid off or furloughed because of the pandemic cut or reduced coverage, according to ValuePenguin.
“Our data shows that people who lost their jobs due to the pandemic were fairly likely to lose their health insurance, too,” Andrew Hurst, an analyst with ValuePenguin, said. “Additionally, 39% of all Americans who eliminated some form of insurance said they got rid of their health coverage. Of the people who were laid off because of the pandemic and got rid of a policy, 44% said that they eliminated their health insurance.”
Impact on auto
Hurst told PropertyCasualty360.com that a noticeable number of survey respondents who had their wages cut because of the pandemic also reduced or got rid of their auto insurance. While these consumers were cutting auto coverage, driving was actually becoming a more risky undertaking.
“Moreover, 22% who lost wages because of COVID-19 reduced or eliminated coverage because it was ‘unnecessary,’” he said. “While this doesn’t mean that this 22% cut their auto insurance, our results support the notion that people who drive less than they normally did before the pandemic, especially if they’re driving less now because they’re going into work less, reduced their auto insurance coverage to some degree in the past year.”
The survey also found that 40% of respondents making more than $100,000 a year completely eliminated their auto coverage, Hurst pointed out.
“People earning these wages are more likely to have jobs that allow one to easily work from home,” he explained. “So, in short, it’s not certain, but it seems as if driving less may have resulted in some policyholders rethinking their coverage levels.”
People driving less is also leading to more interest in usage-based auto insurance.
Was it worth it?
As noted, a lot of consumers that reduced or eliminated coverage in 2020 regretted doing so. But did they achieve their budget-stretching goals?
Hurst said the survey did not reveal many details around potential savings, but he did add: “By our calculations, if a policyholder reduced — not eliminated — their auto coverage to meet the minimum requirements in their state, they might save $63 per month on average, or $756 per year. But any savings figure would depend on the policyholder’s state since rates fluctuate so much based on location.”
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