Although people say it’s too expensive and they can’t afford it, the number of households covered by life insurance has grown by nearly 5 million since 2010.
That’s according to LIMRA’s “2016 Trends in Life Insurance Ownership” study, which found that the growth in households with life insurance coverage actually reflects an increase in population, rather than an increase in market penetration. The study found 30 percent of households remain uninsured, equal to the record low set in 2010; the 70 percent coverage rate is unchanged since 2010.
The rate of individual life insurance ownership is also unchanged, at 44 percent.
But just because people have life insurance, it doesn’t mean they have adequate coverage, the study found. A total of 60 million households — 48 percent — have a life insurance “need gap” that averages $200,000. That gap is growing, too; average total coverage now replaces only three years of household income. Back in 2010, it covered three and a half years of income. In addition, group life ownership rates are decreasing.
More than 7 in 10 American households say a reason they have not bought more life insurance is because they have other financial priorities right now, such as paying off debt or saving for retirement. Nearly two-thirds say they cannot afford it.
Millennials, interestingly, are going in for life insurance in a big way, with the ownership rate among those under the age of 35 growing by 48 percent. Overall, 70 percent of millennials own some life insurance (individual, group or both); this is 10 percentage points higher than in 2010. Also, overall ownership rates are rising among younger couples (under the age of 45) with children.
More than half (51 percent) of all households say they would rely on life insurance to help pay bills and to maintain their lifestyle in the event of the primary wage earner’s death. Life insurance tops all other sources of financial assets for households earning under $50,000 annually.
If you’re wondering why millennials are flocking to buy life insurance, their reasons are the same as the broader population, with the top three reasons cited as being able to pay for final expenses (funeral, burial, etc.), 49 percent; to replace income, 35 percent; and to pay off their mortgage, 22 percent.
Of those families who have no life insurance coverage, 73 percent say they need life insurance and 62 percent say they would be in immediate financial trouble if a primary wage earner died. And while they may not have it, they have aspirations; two thirds of these households say they are likely to purchase life insurance within the next 12 months.