The coverage gap is something that has been talked about in the life insurance industry for some time now, and while progress is being made in many areas here, most experts concede that it's probably slower than anyone in the field would like. This may be particularly true for young adults who are just starting their families - and therefore have significant need for such coverage - but who may have misconceptions or concerns about the prospect of obtaining such coverage.
The reason that most young families may be able to benefit most significantly from life insurance is that, if something were to happen to the policyholder, it would go a long way toward helping to replace their income, according to a report from the Rapid City Journal. Unfortunately, millennials - many of whom are now starting families as they age into their late 20s and early 30s - tend to be the age group that has the least life insurance coverage and, more worrying, knowledge.
What can young families do?
For this reason, it may be incumbent upon life insurers and agents to do more to simply educate these young people about their coverage options, and some of the financial realities they may face that they might not ever have considered before having kids, the report said. Often, they not only don't know how much life insurance they need, but also what such coverage will actually cost them (like most people, millennials tend to dramatically overestimate the monthly premium) and how to go about buying it.
Most experts will recommend that young families have life insurance policies that will cover them for somewhere between $500,000 and $1 million, the report said. While that's likely to be 10 or even 20 times their annual salaries, they must account for how expensive it's becoming to raise children, and that the death benefit could actually end up being quite small in comparison with the cost of 18 years of living at home, plus four more of college, and potentially more.
What are the options?
It seems that one of the biggest reasons life insurance costs are often estimated to be so high is that people don't know much about term life insurance, the report said. Having a policy for 20 or 30 years - even at payouts that high - can actually be quite affordable in a lot of cases, usually at less than $50 per month for healthy adults in their late 20s or early 30s.
The more that can be done to bridge the gap here, the better off both parties are likely to be. For life insurers that can highlight the benefits of such coverage, they're likely to be quite successful when it comes to locking in clients for decades to come. Meanwhile, this kind of effort will also be a major benefit to those new clients, especially when they're young families, because of just how much assurance they can get from knowing they have an affordable, effective life insurance plan to better protect their loved ones going forward.