Every day, more millennials are reaching the age and financial stability needed to make some serious long-term life commitments. Whether that's getting married, having kids, buying a home or any combination thereof, these are decisions that require careful consideration and, usually, financial planning. However, there's some evidence that these young adults may not be fully prepared to make the most effective decisions when they consider situations that might arise two, five, 10 or more years from now.
One such issue here is many millennials don't adequately prepare their finances for these big life events, including not doing enough to get the life insurance coverage they may need.
Millennial parents today say they plan for family trips more frequently than they do for things like saving for college and retirement, according to a new survey from Penn Mutual. In addition, while more than two-thirds of millennials indicated they understand the value of life insurance beyond the death benefits, that number trails behind the previous two generations; 80% of Gen-Xers indicated the same, as did 93% of boomers. Close to 3 in 5 millennial parents say they would like to receive a life insurance policy - either for themselves or their kids - as a gift.
Interestingly, this all came as 94% of millennial parents think of themselves as planners, so there may be a disconnect between the understanding of what's needed to prepare for the future, and what it actually takes to follow through.
The need for coverage
The latest Life Insurance Gap Survey from New York Life highlights just how much millennials may need to do to obtain the kind of coverage they actually need, especially as they make big financial decisions. For instance, close to 4 in 5 young adults say they don't have as much as they'd like.
These results came after respondents were asked to consider how much coverage they would need if their household's primary earner were to pass away unexpectedly (that is, accounting for both current and future expenses) versus how much life insurance they had. Only 10% noted they definitely have all the coverage they need right now.
Moreover, 19% of millennials say they don't feel financially secure today, though it's worth noting that this was actually better than the survey average for all age groups. At the same time, almost half are stressed about their ability to save and plan for the future, and 40% felt the same way about current income and long-term education expenses.
Dealing with debt
As has often been highlighted in recent years, all long-term financial decisions for millennials are set against the backdrop of massive debt loads that often hang over their heads. A recent study from Northwestern Mutual found the average millennial has nearly $28,000 in outstanding balances, comparable to that of boomers and about $8,000 less than the leaders - Gen X.
However, it's worth noting that millennials were the most likely to say their biggest debt load comes from credit cards, which carry higher interest rates and are therefore more difficult to pay off on an ongoing basis. Indeed, 22% of millennials say they don't even know what the standard interest rate is on those cards; and that comes as close to 1 in 3 consumers of all ages have interest rates north of 15%.
In addition to this, about 1 in 5 people of any generation said they don't know how much debt they have. Almost 1 in 7 Americans indicated they think they'll be in debt forever.
Education is key
Generally speaking, millennials may be pretty financially savvy, but they also might not have all the information they need about the value of life insurance and the role it plays in long-term financial planning. An Association for Advanced Life Underwriting poll in September found that close to 2 in 3 Americans of all ages say they either need to buy life insurance or don't know they're covered already, despite the fact that almost half felt it was important to their financial needs.
In all, 44% of millennials (as well as 51% of Gen-Xers) said they think life insurance would be a part of their ideal financial plan, but as usual, the same old misconceptions were offered for why they don't currently have it: They think it would be too expensive, already have group insurance through an employer, or will buy it at some point in the future.
However, the reasons people typically thought coverage would be valuable for them was to cover final expenses, help loved ones avoid unexpected debt loads or to continue financially supporting family - all in the event of an untimely death.
For that reason, it may be critical for companies to do more to provide outreach for millennials specifically as it relates to both the long-term need for life insurance, especially coverage that can provide a living benefit in addition to the more commonly understood death benefits. When millennials can make more concrete plans for their future with the right education about life insurance, they may be far more prepared to tackle whatever life throws at them in the years ahead.