In recent years, there has been a focus on the amount of life insurance owned by millennials — but it is becoming increasingly apparent that this may not be the right generation to worry about. In fact, the pandemic has spurred many in Generation Y to seek out that kind of coverage, especially as more of them have made major life changes in recent years, like starting families and buying a home.
Instead, a real issue is arising for the age group immediately preceding millennials: Generation X. While Gen X had a number of years to establish themselves in the adult world before millennials came of age, the pandemic may have leveled the playing field between these demographics. The latest MassMutual Consumer Spending & Saving Index found that roughly the same relatively low number of Gen Xers and millennials are able to pay their bills on time consistently, at 52% and 49%, respectively.
Likewise, a similar gap exists for these two generations when it comes to eliminating spending on non-essential things (43% to 39%), and in all cases, both generations are worse off than boomers. The good news is people broadly believe the worst of the global financial downturn experienced because of the pandemic is over, and they are increasingly optimistic about their finances as a result.
Where life insurance fits in
A large percentage of Gen Xers already had some amount of life insurance, especially because they are at the point where their kids are starting to get older and have greater financing needs of their own. However, as is often the case these days, there may be a disconnect between two factors, according to Bankrate. First is the understanding of the need for life insurance and actually obtaining it, and second is the amount of life insurance people carry versus what they might actually need in the event of an untimely death.
In many cases, experts say, life insurance doesn't really start to feel like a serious financial concern for people until they reach their 40s or even 50s, but by that point, the cost of coverage is often far more significant than it would have been if they'd sought it a decade earlier. Of course, for those who are still struggling financially (whether due to the pandemic or not), that higher cost is an issue that could derail their ability to get the coverage they need, at least in their own minds if not in actual practice.
For that reason, it's vital that people explore all their coverage options and identify any areas where they can make changes that would make life insurance more affordable, especially as they reach middle age.
What's the impact?
The good news is that more people (of all ages) seem to have been spurred by the difficulties — and both the real-world and symbolic impact — of the pandemic to investigate their life insurance options. The 2021 Insurance Barometer Study found that 31% of Gen Xers now say they are more likely to buy life insurance as the effects of the COVID crisis continue to recede, more than double the number of boomers who reported the same urge, but trailing the 45% of millennials who now want to take such a step.
However, this came at a time when the percentage of adults (regardless of age) who had life insurance was falling. In all, 52% of respondents said they have some sort of coverage, down from 54% in 2020, 60% in 2016, and 63% a decade earlier. Much of that recent year-over-year decline amid the pandemic may have been related to job loss; while there was a small decline overall, the share of people with individually held life insurance policies remained steady at 39%. As such, it's likely that employer-based group coverage took a tumble under COVID.
What's the hurdle?
It's worth noting that while understanding of the need for life insurance is growing, even for the most engaged demographics, interest is still below 50% for any generation. In all, just 36% of people say they plan to buy life insurance in 2021, though that is the highest level observed in the study's history, LIMRA said. As usual, it's possible this percentage would be even higher were it not for some critical misconceptions about life coverage held by the general public.
More than half of respondents indicated that they felt life insurance was at least three times more expensive than it is in reality, and fewer than 1 in 3 adults polled believed they were "very" or "extremely" knowledgeable about such coverage. In addition, many people said they thought the lower-value group coverage they receive as part of their employment would be sufficient to cover their long-term financial needs.
For these reasons and many more, insurers would be wise to make sure outreach remains a critical part of their plans going forward. As more people get back on solid financial footing, they'll need to be able to follow through on their newfound understanding that more life insurance should be part of their financial future.