While there may be many misconceptions out there about the ways in which the life insurance industry works, particularly among young people, it seems that many Americans under the age of 40 understand the value such policies can hold, meaning that it may be wise for insurers to do more to educate these prospective millennial customers going forward.
In all, 93 percent of people between the ages of 21 and 40 years old, with annual household incomes of more than $30,000, say they know why life insurance is important and generally understand how it works (for instance, many know the importance of buying insurance while still healthy and at a younger age), according to new data from Guardian Life. But at the same time, only 34 percent of those polled felt confident they knew how to collect on a claim. Meanwhile, three in five respondents say they don't know the difference between term and permanent life insurance.
Further, very few have ever actually turned to professional assistance when it comes to making decisions about their life insurance coverage, the report said. While 65 percent of those surveyed said they get their policies through their jobs, nearly 80 percent said they have never considered changing their policies in any way. In addition, while another 60 percent say their significant others also have some sort of life insurance coverage, more than half of that group don't know what type of coverage it is, and 20 percent overall believe that their partner being covered means they won't have to be.
Interestingly, nearly two-thirds of respondents said they think their policies will help to cover not only their final expenses, but also their debts and living expenses, as well as day-to-day costs including education for their children, healthcare, and retirement savings, the report said. Most felt that the amount needed to cover all those costs was more than $1 million, but of those who knew how much their life insurance policies paid out had an average value of just $390,000, well short of their expectations.
While the high percent of young adults acknowledging the need for insurance may be encouraging to insurers, the lack of knowledge of these policies shows that companies have some work to do in attempting to educate and reach those potential insureds.