Lewis & Ellis, LLC

Which groups need life insurance most?

Life Insurance and Annuities
by Lisa Jiang
Which groups need life insurance most?
Which groups need life insurance most?

Whether they realize it or not, almost every adult probably needs at least some life insurance. It can help cover final expenses and outstanding debt balances, go toward a college fund for loved ones, or simply be used to replace income. Interestingly, many polls reflect the fact that most Americans see the value of life insurance for all of these reasons and more.

However, despite the broad understanding that life insurance is a valuable part of any long-term financial planning, there is still a major life insurance gap in this country, fueled largely by some specific demographic groups. Unfortunately, all too often those groups may be the people who need coverage most. The following is a summary of just a few such people:

1) Young parents

Perhaps the demographic with the greatest need for life insurance is young people who have become parents for the first time, according to Peter Colis, a life insurance executive and member of the Forbes Finance Council. After all, a good financial plan is a must for anyone looking to raise a child and do so without overspending, and it's always a good idea to factor the cost of life insurance into any budget.

The issue, often, is that young people tend to overestimate the cost of such coverage - often by double its actual price tag - because they conflate permanent life insurance with far more affordable term options. Moreover, some might not even realize term life insurance is an option. While few young parents are thinking about a death anytime soon, it's always wise to prepare for the unexpected.

Adults of all ages may need life insurance more than they think.Adults of all ages may need life insurance more than they think.

2) Millennials

Young parents are, more often than not these days, a subset of the millennial generation, and this group of young adults goes without proper life insurance far too often, according to the latest Life Insurance Gap Survey from New York Life. Today, the vast majority of Generation Y feel they have the level of life insurance coverage they know they need, and just 10 percent say they have exactly as much coverage as they need.

On average, members of this age group say they're 78 percent short of where they want to be, the survey found. Indeed, more than half of respondents said that if they were to suffer the unexpected death of a breadwinner, or even just losing their jobs, they would not be able to handle the financial strain.

On the other hand, when millennials have a little financial security and take the time to evaluate their needs, two-thirds of them say they find the coverage that's right for them.

3) Women

Many Americans generally aren't comfortable dealing with life insurance in the first place, given that they often don't know much about it, but that seems to be especially true among women, according to a survey from the employee benefits company Unum. The poll found that 37 percent of women say they get stressed or worried when thinking about life insurance, compared with just 23 percent of men.

Part of that may be due to the fact that women were twice as likely as men to expect their parents to assume their various financial burdens after they passed away (16 percent of women versus just 8 percent of men), the survey showed. Moreover, just 28 percent of women thought their spouse would take on that debt, versus 40 percent of men.

4) Younger workers

Another subset of millennials - between 25 and 34 at the time of the poll - is the young worker group, of which about 1 in 5 say they don't even know if they have life insurance, the Unum survey further found. Only 2 percent of people between 35 and 49 had the same level of uncertainty.

However, 40 percent of younger respondents said there was a practical reason for their lack of life insurance, the survey showed. That includes the fact that some felt they just didn't need the coverage in the first place, or that they thought it would be too expensive.

"It's concerning that such a sizable percentage of the younger demographic who tend to be starting families of their own are leaving their loved ones in such a potentially risky financial situation," finance expert Laura Adams told Unum. "For most people, their ability to earn a salary throughout their life is the biggest asset they have, and term life insurance is a relatively inexpensive way to protect that asset until they retire, or their family financial obligations decrease."

5) Empty nesters

At the opposite end of the age spectrum, however, comes another group: those who are nearing or past retirement age and whose adult children have moved out, according to the Insurance Information Institute. While they may not necessarily need to replace income lost with an unexpected death (though that should still be a concern if Social Security eligibility hasn't kicked in yet), life insurance can still play a big role in long-term financial planning for people in their 50s and 60s.

Of course, many empty nesters may have carried life insurance for years but are thinking about allowing it to lapse, which may put them at risk of experiencing a significant financial loss they may not expect, the III noted. Meanwhile, the need for such coverage may not be as pressing as it once was, but long-held life insurance can still provide a critical financial safety net that other savings vehicles can't match.

What do these groups all have in common? A lack of understanding of their life insurance needs and the financial realities surrounding such coverage. To that end, it's incumbent upon life insurers and brokers to perhaps do more to bridge gaps with consumers who might be most in need of life insurance coverage. Especially because misconceptions about cost and need are so prevalent among these groups, it's vital to highlight affordable, practical coverage that will help people meet their various financial goals, even as they change over time.



Consultants to Contact