Many Americans do not fully understand what life insurance is and how it works. This can be partly attributed to the fact that life insurance can be a complex financial instrument, and partly because of a lack of awareness.
The latest life insurance statistics estimate that most Americans don’t have enough life insurance to cover the financial needs of their dependents. Even worse, many don’t own a policy at all. Below, we examine the unmet life insurance needs of U.S. households as well as the reasons they don’t buy more.
Life Insurance Statistics For This Year (2016)
The following life insurance facts offer insight into the $15 trillion coverage gap in the United States.
- 85 percent of American consumers agree that most families need life insurance. Unfortunately, only 62 percent say they own a policy, meaning nearly 40 percent have no life insurance.
- In 1960, 72 percent of U.S. households owned individual life insurance coverage. In 1992, 55 percent of Americans had a policy. As of 2013, only 44 percent of American families were individual policyholders, a 50-year industry low. As a note, private individual life insurance excludes policies provided by employers as part of a benefits package.
- In 2013, 50 percent of U.S. households who own life insurance believe they don’t have enough.
- According to recent government reports, you can expect to spend approximately $240,000 raising a child born in 2012.
- In 2010, 40 percent of U.S. families with children under the age of 18 believe they would immediately experience significant hardship covering the everyday living expenses if a primary wage earner were to die today. Similarly, 70 percent of households would have trouble within a few months, indicating that many Americans are not financially secure or protected in case of a tragedy.
- 30 percent of spouses wish their significant other would have more life insurance.
- Women who are the primary breadwinners for their families own 69 percent of the average coverage men have.
Cost of Life Insurance
So, why aren’t families buying adequate life insurance? While Americans understand the importance of buying a policy, they significantly overestimate the cost of life insurance.
- 86 percent of consumers believe the cost of life insurance is too high, citing expensive premiums as the reason they don’t buy more coverage. However, Americans estimate life insurance rates to be almost 3 times more than actual rates.
- $150 – the real annual cost of life insurance for a 20-year, $250,000 term life insurance policy for a healthy 30-year-old.
- $400 – the amount Americans estimated the above policy would cost.
If you’re worried about finding a cheap policy, use this comprehensive guide to buying affordable life insurance.
Who Needs Life Insurance?
You may be wondering if you need life insurance. Since 41 percent of all life insurance purchases are event-related, here are a few life-changing events that will likely cause you to consider buying a policy.
- Starting A Family
- Buying A Home
- Starting A Business
- Supporting Aging Parents or Grandparents
If you’ve experienced any of these events recently, it might be time to research and compare life insurance quotes, companies, and policies. It never hurts to start with a free insurance quote online, and comparison shopping will help you calculate how much life insurance you need and the best type of policy for your family.