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Addressing the life insurance coverage gap

Life Insurance and Annuities
by Jeff Lee
Life insurance applications start 2021 on the right foot
Life insurance applications start 2021 on the right foot

Life insurance companies are fully aware that there's often a sizable disparity between the amount of life insurance people need and the amount they have in their names. Unfortunately, this difference is most pronounced among one of the youngest generations of adults, at a time in their lives when many of their predecessors were all too happy to purchase life insurance.

The issue for life insurance providers, then, is bridging that divide and giving young adults better access to coverage that more specifically meets their personal and financial needs.

Today, the typical millennial who even has life insurance in the first place has a self-reported coverage gap of about $352,000, according to the latest Life Insurance Gap polling data from New York Life. While millennials often have about $100,000 in life insurance coverage, they also state that their needs - based on a number of financial and personal considerations - are in excess of $450,000. That's a gap 60 percent larger than the one for the general public.

Digging into the findings
Indeed, only about 1 in 10 millennials say they have enough coverage to take care of all their financial needs, such as mortgages, retirement funding, covering a child's college education costs, and so on, the report said. But that came at a time when 81 percent said they feel financially secure overall; just 76 percent of the general population felt the same way.

Nonetheless, nearly half say they're stressed about their current savings efforts, and nearly as many voiced similar concerns about their future financial needs, the report said. About 2 in 5 said they were worried about their current income.

Presenting life insurance as a good value might be the biggest step to addressing the coverage gap.Presenting life insurance as a good value might be the biggest step to addressing the coverage gap.

Amid a recovering economy
Perhaps the biggest reason millennials feel better about their financial futures - even without sufficient life insurance - is that the economy is improving. This year's Financial Concern Index from the insurance-industry group Life Matters declined sharply from 2017 - indicating better sentiment overall - even as many Americans said they were worried about their day-to-day living expenses and didn't know if their savings were good enough for the long run.

Interestingly, despite the mostly positive sentiment - and the fact that 90 percent of respondents felt a family's primary wage earner needed life insurance - about 20 percent of people who had life insurance felt they didn't have enough, the survey found. In addition, more than 3 in 5 respondents said they didn't have life insurance specifically because they had other financial concerns.

Where millennials specifically were concerned, 2 in 5 said they wanted their spouse or partner to have more life coverage than they do right now, the survey found. Slightly more than that overestimated the cost of coverage by about five times the actual amount.

What can insurers do?
With all these findings in mind, it's worth noting that millennials seem to understand the value inherent to life insurance, but misconceptions and other concerns could be big hurdles toward bridging the coverage gap, according to AXA. Consequently, it seems outreach and ease of use are key. Many consumers say they have at least researched life insurance online, but if there are impediments to quickly and easily obtaining low-cost term life coverage - for any age group - that can be enough to cause some concerns.

Making it easier to find out about coverage costs and actually sign up - that is, by not requiring medical exams - is often seen as a great way for life insurers to bridge the needs gap and do a better job of connecting with consumers, the AXA advised. Furthermore, while many may understand the need for coverage broadly (i.e., that obtaining life insurance is a good, responsible financial decision) they might not see why they specifically and individually need it.

That said, having the ability to highlight their personal need in simple-to-understand terms, directly through a web portal or mobile app, may do a lot of the work life insurers have struggled with in recent years. Simply put, if it's a matter of highlighting the benefits of life insurance, the coverage type's reputation will often precede it, even with millennials. But showing that it's attainable on just about any budget may be the last step in bridging that divide.



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