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Three years after the COVID-19 pandemic began, Americans are still feeling its emotional, physical, and economic impact, ever reminding us of the importance of preparing for the unexpected. In 2021, we explored the effects COVID-19 had on financial attitudes and behaviors related to purchasing life insurance. How have those attitudes shifted now that we are even further away from the peak of the health crisis?
In this blog post, we’ll evaluate new trends in life insurance adoption, see how attitudes may have changed regarding life insurance, and discuss why it’s never too early to purchase a policy.
Younger Populations Drive Demand for Life Insurance
Over the last year, insurance ownership has increased for both Gen Z and Millennial populations, with Gen Z seeing the largest increase. According to the 2023 Insurance Barometer Study by LIMRA and Life Happens, 40% of Gen Z individuals and 48% of millennials have life insurance, a six and three percent increase, respectively.
Among the younger generations who do not currently have life insurance, the recognized need for coverage remains elevated. Forty-nine percent of Gen Z individuals know they need coverage and 44% plan to adopt a policy this year. Forty-four percent of millennials know they need coverage and half of them plan to adopt a policy this year.
For both Gen Z and millennials, covering death-related expenses is the number one driver of life insurance adoption, with wealth transfer a close second. Forty-one percent of millennials and 26% of Gen Z say they have coverage because their employer provides it, which typically means they are underinsured. In fact, 53 million Gen Z and millennials believe their current insurance coverage is not enough.
Women Are Particularly Vulnerable to Coverage Gaps
Men are more likely to have life insurance coverage than women. Currently, only 49% of women carry a policy compared to 55% of men. That may not seem like a large difference, but the number declines drastically for single mothers.
According to the U.S. Census Bureau, there were 7.9 million single-parent households led by a mother in 2022. Roughly 60% of them reported in the latest Insurance Barometer Study that they either needed life insurance coverage or needed more of it.
Most single mothers reported adopting a life insurance policy specifically to cover burial expenses. Only 26% of them purchased life insurance to replace lost income in the event of an untimely death, which is interesting considering more than half of them said they are “extremely concerned” about leaving dependents in a financial bind after death.
Barriers to Life Insurance Adoption
A recent Forbes Advisor survey found nearly one in four Americans have no form of insurance coverage. The reasons people do not purchase life insurance are diverse, but we focus on some common ones here:
1. Age
Young professionals tend to overlook life insurance coverage because they feel vibrant and full of life. Death seems a distant possibility and, statistically speaking, it usually is for most young people. Yet, they pose less of a risk to insurance companies, making it a perfect time to acquire an affordable, low-cost policy.
2. Health
When people are healthy, they often do not think of their own mortality, especially when their good health is combined with youth. However, good health is another great reason to adopt a policy since, like youth, it poses less of a risk to insurance companies.
3. Cost
To some, life insurance can seem like a lofty benefit reserved for those with plenty of assets. While life insurance is a great tool for preserving wealth, it is affordable enough for anyone regardless of their financial picture. For example, a healthy 25-year-old female purchasing a 10-year term policy would pay roughly $16 a month for $250,000 of coverage (that’s about $.50 a day!).
4. Complexity
The abundance of available life insurance products can be overwhelming for some individuals, making it difficult for them to arrive at informed decisions about their coverage needs. At SWBC, we offer two simple policies (as well as the more complex universal life): Term Life and Final Expense (or guaranteed issue whole life).
Term life insurance covers the individual for a specified period. Policies range from 10 to 40 years with many variations in between and provide $50,000 to several million dollars worth of coverage. To underwrite this type of policy, insurance companies do require some medical evidence to assess risk and with the smaller face amounts, this may often be done online. But once the policy is in place, premiums stay the same for the level term of the policy, regardless of age or health.
Unlike term policies, whole life insurance provides permanent death benefit coverage for the life of the policyholder. SWBC’s Final Expense offering features flexible benefit amounts that range from $2,000 to $25,000. No medical evidence is required to obtain the insurance, but the proposed insured must live a minimum of two years for the full benefit paid. Should the insured pass away prior to that, the beneficiary receives a return of the premiums paid. Additionally, the coverage builds cash value—tax-free—over time, which policyholders can use to pay premiums or borrow against. Beneficiaries can apply the death benefit received toward funeral services, burial costs, and outstanding debts.
The pandemic affected us all in different ways. While these trends may be indicative of nationwide life insurance adoption patterns, they may not point to a solution that is right for you. Remember, life insurance is not only a financial safeguard but also a resource for peace of mind. By reflecting on lessons learned during the pandemic, assessing your current circumstances, and leaning on professional advice, you can adapt life insurance coverage to your evolving financial obligations and protect yourself—and your loved ones—with confidence.
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