As of 2023, 52% of Americans report having a life insurance policy, according to a study conducted by the Life Insurance Marketing and Research Association (LIMRA) and Life Happens. While this is more than half of the population, there are still millions of people without a policy in place, resulting in a wide life insurance coverage gap.
The good news is that this report shows that more people, particularly younger generations, are showing interest in life insurance coverage, making room for insurance agents to step in and match more people with the right policy.
Quick Links
- What You Need to Know About the Life Insurance Coverage Gap
- What Causes a Life Insurance Coverage Gap?
- What Does the Life Insurance Coverage Gap Mean for Agents?
What You Need to Know About the Life Insurance Coverage Gap
When we talk about the life insurance coverage gap, we’re talking about the amount of people who are uninsured but show a desire to obtain coverage. It seems as though the bridge between going uninsured and purchasing a policy is perceived as too large for people to cross. According to the 2023 Insurance Barometer Study, 39% of consumers report that they intend to purchase a policy in the next year.
Fortunately, this presents a good opportunity for life insurance agents to help close the gap. With the right knowledge about life insurance, more people will understand what opportunities are available to them, hopefully encouraging them to work with an agent to find a whole life insurance policy that works for them.
Young Generations Want Coverage
While life insurance is often geared toward individuals and families thinking about retirement and end-of-life plans, insurance agents are seeing an increase in interest from Millenials and Gen Zers. Keep in mind that these populations are interested in ease of information and access, which tends to push them to online resources. But, they still want to hear from insurance professionals.
To apply for and learn more about life insurance coverage options, your clients are going to be most interested in convenient methods. More specifically, instead of meeting face to face, life insurance agents need to explore digital avenues to interact with clients. With younger generations turning to the internet and social media for information, this shift creates an excellent opportunity for insurance agents to produce informative content that helps make insurance policies easy to understand. After all, a lack of financial knowledge is a large reason why people tend to go uninsured.
The Pandemic Push Toward Life Insurance
It comes as no surprise that a global event which impacted the health and wellbeing of people everywhere has resulted in increased interest in life insurance coverage. In fact, a Deloitte survey uncovered that, in 2021, “insurance applications increased in record numbers, due to Americans’ increased focus on their mortality.”
The bottom line is more people are realizing their lives can change instantly and they need to be prepared for the worst. With increased concerns about mortality, more people are becoming interested in ways to stay financially secure as they get older. While this is leading to an increased interest in life insurance policies, this evolution has also changed the way agents provide services.
Who is Purchasing Life Insurance Coverage
While data shows Millennials and Gen Zers are interested in life insurance, that doesn’t mean they’re the ones purchasing life insurance products. The truth is, the cost of insurance coverage is a large drawback when it comes to purchasing a policy. A Forbes Advisor article on the status of the life insurance industry in 2023 notes that “people across the country try to manage rising costs by reducing spending, buying new life insurance policies may not be making the cut.”
This means that younger generations don’t have life insurance policies while older generations are more likely to have a policy in place. So, since they tend to have lower premiums, it comes as no surprise that “48% of U.S. households report having a term life policy, making it the most popular choice compared to cash value policies.”
These studies also show that men are more likely than women to own policies. When focusing on parents, families with young children are more likely to have policies in place, though 47% of these families say they don’t have enough coverage. Here we see a large coverage gap where “56% of Gen Z and millennial parents reported not having enough coverage.”
What Causes a Life Insurance Coverage Gap?
In order to reduce the life insurance coverage gap, it’s important to first understand why the gap exists. How come people are hesitant to get coverage if it’s designed to help them in the future? There are a number of reasons, but here are three of the most common factors that lead to hesitation around life insurance.
1. Lack of Knowledge
A large cause of the life insurance coverage gap is the lack of knowledge surrounding life insurance. Life Happens seeks to resolve this issue by providing unbiased and free resources online in order to educate audiences about all kinds of life insurance products.
With more knowledge comes more confidence. In fact, knowledge gives individuals the upper hand when it comes to smart decisions for themselves and their families. So, in order to guide clients toward an appropriate life insurance product, you need to lead with an educational approach. The more knowledge someone has about life insurance, the less daunting it will seem.
2. Perceived Obstacles
Unfortunately, surveys show that many Americans believe life insurance coverage is not an option for them, or it’s not something they need. With limited understanding, people are more likely to make assumptions about what they think they need – or, in this case, what they don’t think they don’t need.
One perceived obstacle of life insurance is the ability to be approved for a policy. In order to obtain a policy, applicants need to complete a medical exam or an evaluation of their medical history. An ongoing medical condition could deter an individual from pursuing coverage. However, there are other ways, such as accelerated underwriting, to be approved for a life insurance policy if they aren’t in perfect health.
Another example of a perceived obstacle is not knowing how much coverage is needed or what type of coverage is best. LIMRA reports that “40% of Gen Z parents and 29% of millennial parents say they haven’t purchased coverage because they don’t know how much coverage they need or what type to buy.” Insurance agents can help clients navigate this by assessing what their clients are looking for and finding a product that fits with their needs and their lifestyle. So, if someone is concerned about hefty premium payments, they might be interested in a term life insurance policy. If you have a client that is interested in cash value, a whole life insurance policy that pays dividends would be something to recommend.
3. Financial Challenges
Many people think life insurance is too expensive and they won’t be able to make regular premium payments. Alternatively, they might think life insurance policy is not a priority right now and their money would be better used for other expenses, particularly if they’re young and healthy.
The reality is that life insurance doesn’t have to be expensive. And, it should be considered more of a “need” rather than a “want.” Since life insurance costs tend to increase with age, initiating a policy sooner rather than later is a great way for policyholders to keep their premiums low. Besides, life insurance is intended to provide some security later in life, and the best time to start planning for the future is now.
What Does the Life Insurance Coverage Gap Mean for Agents?
Coverage amounts, riders, and premiums can get confusing quickly. Coupled with financial obstacles and a lack of knowledge, it’s not surprising that so many people in the United States are uninsured or believed they are underinsured. This means independent insurance agents can step in and guide clients toward life insurance products that work for them.
Not only should insurance agents be acting as a professional resource, they should use the coverage gap among Millenials and Gen Z to explore new avenues of providing service. More people are looking for digital interactions, so it might be good to use social media as a way to connect with clients or reach out to new people. When doing so, it’s important to lead with accurate and easy to understand information while encouraging your audience to reach out to you for help if needed.
We know that a large contributor to the coverage gap is a lack of education. So this is a great place to start. ELCO Mutual aims to be an educational resource for independent insurance agents, providing thoughtful resources and products that can give more people peace of mind and financial security. To learn more about whole life insurance products from ELCO, reach out to our team today!
