According to the annual study, half of consumers age 25-34 (52 percent) state they are very or extremely concerned about having sufficient funds for a comfortable retirement compared with just 47 percent of consumers age 35-44. Nearly a third of millennials (27 percent) are as concerned about paying for a child’s schooling (compared with 21 percent of those age 35-44) and burdening others with final expenses (28 percent, compared with 19 percent of consumers age 35-44). Surprisingly, consumers under age 25 show the most worry of all age groups when it comes to paying for medical expenses (43 percent are very or extremely concerned), leaving dependents in a difficult situation if they were to die prematurely (38 percent), and paying for a child’s schooling (36 percent).
“Having come of age through the recession and facing uncertainty about the future of employer and government protections, millennials are having to take personal financial responsibility to ensure their future plans are secure,” said Marvin Feldman, CLU, ChFC, RFC, President and CEO of Life Happens. “Life insurance can provide stability and financial peace of mind and yet, while younger Americans recognize its importance, they a lack of basic understanding about it, which may be hindering them from getting the coverage they need.”
Misconceptions Hindering Consumer Purchasing Decisions Despite the Need
According to the study, nearly one third of adults overall (31 percent) believe they would feel the financial impact from the loss of a primary wage earner within one month of their passing. That may be a reason why, consistent with previous years, about 65 percent of consumers agree that they personally need life insurance and one in four (27 percent) believe they need more. One third of those surveyed under age 25 (33 percent) and age 25-34 (29 percent) say they need more.
The most commonly cited reason survey respondents provide for not purchasing more is cost (63 percent cited “too expensive”) followed next by having “other financial priorities” (59 percent). The survey found this to be particularly true among younger consumers, who are generally more likely to qualify for preferred rates because of their age and health status.
When asked the price for a $250,000 level-term life insurance policy for a healthy 30 year old, the median estimate given by individuals under the age of 25 years is $1,000—nearly 10 times its actual cost of $150 a year. Nearly one in five consumers in this age group believe the same policy costs $3,000 or more.
“Our findings showed an astounding lack of awareness about the true cost of life insurance. Yet, younger consumers are not alone in this misconception. Overall, more than 80 percent of Americans we surveyed overestimate the cost of life insurance and this misconception hasn’t changed much in recent years,” said Todd A. Silverhart, Ph.D., corporate vice president, LIMRA Insurance Research. “It is important to continue to educate potential buyers, particularly younger consumers who can often pay less, about the policy options that exist.”
This is the fourth year Life Happens and LIMRA have conducted the Insurance Barometer Study to understand how consumers think and act in regards to life insurance and other financial products. In 2014, the study investigated consumer perceptions about life, disability and long-term care insurance as well as their preferences for communicating with financial advisors and agents. For more information and to access a copy of the full report, visit www.lifehappens.org/barometer.
The 2014 Insurance Barometer Study was fielded in January 2014 using an online panel, which surveyed 2,047 U.S. adults age 18-75. The data were weighted by age, gender, education, race, region, and income to be representative of the general population. The margin of error in the study is +3 percentage points.
About Life Happens
Life Happens is a nonprofit organization dedicated to helping consumers take personal financial responsibility through the ownership of life insurance and related products. The organization does not endorse any product, company or insurance advisor. Since its inception in 1994, Life Happens has provided the highest quality, independent and objective information for people seeking help with their insurance buying decisions. The organization supports the insurance industry by providing marketing tools and resources and convening the industry each September for Life Insurance Awareness Month. Life Happens is supported by more than 140 of the nation’s leading insurance company and financial services organizations. To learn more, visit www.lifehappens.org.
LIMRA is a worldwide research, consulting and professional development organization that helps more than 850 insurance and financial services companies in 73 countries increase their marketing and distribution effectiveness. Visit LIMRA at www.limra.com.
Arielle Patrick (Life Happens)
Catherine Theroux (LIMRA)