Life insurance can be a difficult topic but viewing some straightforward facts and statistics might help illuminate it. Whether trying to identify what kind of policy you need or how much coverage to seek, navigating life insurance is easier when you have a clear picture of what’s happening. Learn the facts and uncover which insurance assumptions are myths versus which are factual.
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Life insurance facts and statistics
In 2022, 106 million American individuals were without life insurance or underinsured.
- 50 percent of Americans reported owning life insurance in 2022. Comparatively, 52% of Americans reported owning life insurance in 2021.
- All income groups are now less likely to indicate they have life insurance coverage.
- More than 50% of Americans overestimate the cost of life insurance by 300%.
- 30% of Americans assume life insurance is only for end of life expenditures, leading them to not acquire enough to provide income replacement or allow wealth transfer.
- Life insurance premiums grew by 21% in the second quarter of 2021, the biggest year-over-year increase since third quarter 1987.
- Gender, age, smoking status, health, medical history and other factors effect your life insurance premiums.
- The suicide clause refers to a clause that normally lasts approximately two years, in which an insurance carrier won’t pay out for death by suicide.
- Some life insurance policies exclude coverage if the policyholder died while committing a criminal. Additionally, if the policyholder was slain by the beneficiary, the benefits are often not paid out, which is known as the slayer rule.
- More males report feeling very knowledgeable about life insurance than women, by a margin of 17%.
How many people have life insurance
According to LIMRA’s 2022 Insurance Barometer Study, 53 percent of all people in the United States were insured by some sort of life insurance in 2021. However, as of 2022, the gap between those who have life insurance and those who still need it is 18 points, more than twice as high as the gap from 2011.
Compared to 2021, the need-to-have gap has stayed stable regarding the percent of persons who possess policies. Of those insured, 26 million require more coverage than they presently have, yet just 53 percent reported being likely to receive more. The top three factors discovered to be a barrier between customers getting appropriate or any life insurance included coverage being too expensive, having other financial priorities or simply not knowing how much or what type of coverage to buy.
Life insurance claims statistics
In 2021, insurance benefits and claims were $790.8 billion, according to the Insurance Information Institute (Triple-I) (Triple-I). Compared to 2020, when benefits and claims were $ $747.4 billion, the total increased.
This amount covers death benefits, annuity benefits, disability benefits and other disbursements. The greatest payout in 2021 was $367.2 billion for surrender benefits and withdrawals from life insurance contracts made to policyholders who cancelled their policies early or withdrew cash from their policies.
Life insurance statistics by age
One of the most major determining variables in life insurance costs is age. The premium amount increases on average eight to ten percent for every year of age. Age can also determine whether a person qualifies for life insurance coverage at all. While age may prevent you from some insurance, other types are generally designed towards older folks.
Other interesting life insurance statistics around age include:
- 34 percent of those aged 18 to 24 own life insurance, but 57 percent of individuals aged 65 and older own life insurance according to LIMRA’s 2022 Insurance Barometer Study.
- Those under age 25 are the only demographic that has increased life insurance ownership since 2011.
- As of 2022, 27 percent of persons aged 65 and older reported having life insurance through an employer, down eight percentage points from the proportion reported in 2011. This suggests that there is an increased possibility of persons receiving coverage after retirement age.
- Millennial and Gen X generations are substantially more likely to purchase term life insurance when compared to younger and older generations.
- 72 percent of Gen Z Americans are expected to own permanent coverage, the most probable group of the generations.
- Gen Z comprises the biggest number of persons with a need for increased coverage, at 48 percent. Comparatively, Baby Boomers show a 30 percent need gap, the smallest gap of the different generations.
- The average life expectancy in the U.S. in 2021 was 76.1, down almost a full year (0.9) from 2020.
Life insurance industry statistics
The life insurance sector, like many others, has gone through stormy times since the commencement of the COVID-19 pandemic. While the industry faced some downturns during 2020, several criteria (like sales) suggest towards renewed growth throughout 2021.
- Revenue-wise, the life insurance business generated $945.7 billion in 2021, a 64 percent gain from 2020’s $881.2 billion.
- $820 billion in direct premiums were issued by line, life/annuity insurance in 2021
- About four-fifths of the revenue from life insurance premiums comes from conventional, direct plans. The other one-fifth comes through group life policies. This distribution has kept relatively stable for at least the last three years.
- Other routes of revenue for life insurance firms include net investment income, reinsurance allowance, separate accounts revenue, and other income, totaling $307.8 billion.
- At 11.3 percent, MetLife has the greatest market share of the life insurance business for direct premiums issued, followed by Equitable Holdings (9.6 percent) and Prudential (6.9 percent) (6.9 percent).
Life insurance myths and facts
It’s hardly unexpected that having precise knowledge on life insurance may be less widespread than fallacies about these plans. Life insurance is just as prone to myth and fabrication as any other sector or knowledge base. Thankfully, unlike more esoteric subjects, insurance plans and facts are backed by numbers and contracts. With that in mind, let’s analyse some of the more frequent fallacies regarding life insurance and learn what is really going on.
Myth 1: Life insurance is only for healthy, middle-aged persons.
Fact: You are never too old or too young to purchase life insurance. It’s true that your costs will normally increase as you age and that persons with illnesses or specific risk factors may pay more, but there are life insurance policies accessible for everyone.
Myth 2: I’m single or married with no children, so I don’t need life insurance.
Fact: Your loved ones can use life insurance payouts to pay off your obligations, including student loans, mortgages, and vehicle loans. It can also be utilised to take care of your ultimate expenses, such as burial.
Myth 3: My school loans will be forgiven when I die, therefore I don’t need life insurance.
Fact: To keep it simple, it depends on the type of student loans you have. Federal student loan debt is cancelled upon death or total disability, and family members are not accountable for it. In this situation, a life insurance payout could go to other items such as living expenses or burial fees.
Private student loan debt can be different and is not as black and dry. You’ll need to ask your lender if they grant student debt death forgiveness, which will give you a clearer estimate of how much life insurance coverage you need.
Myth 4: My beneficiaries will have to pay income taxes on the proceeds of my life insurance policy.
Fact: Life insurance benefits are normally income tax-free up to a particular threshold, according to the Internal Revenue Service (IRS) (IRS). However, any interest payments on top of the policy may be taxed.
Myth 5: If I buy a term life insurance policy, I can’t convert it to a permanent or whole life coverage.
Fact: It is possible to convert some term life insurance contracts, depending on the policy you purchased. However, you should find out the information from your agent before buying your policy.
Myth 6: Once my children are grown, I don’t need life insurance.
Fact: Having life insurance later in life has several advantages, like reducing the stress of funeral bills, paying state estate taxes, paying off your debt or just giving your children a nest egg they can use to help support their own families.
Myth 7: I don’t need life insurance as my savings is at a comfortable quantity.
Fact: The national median cost of a funeral with a viewing and burial is $7,848, according to the National Funeral Directors Association. Your savings were likely for retirement, therefore your loved ones may have to pay for your funeral fees if there is not enough left over. Additionally, if you have any debts, your estate will utilise your funds to pay for those, which might diminish the amount left for your beneficiaries.
Myth 8: I cannot afford life insurance.
Fact: Consumers generally overestimate the cost of a term life insurance coverage. Many folks are startled to find that a healthy 30-year-old may potentially receive a $250,000 20-year level term coverage for approximately $13 a month. With this insurance, beneficiaries would receive the whole $250,000 (since most are tax-free) if they were to die away between 30 and 50.
Life insurance can be fairly reasonable, depending on the type and quantity of coverage you need.
Myth 9: I draw no income. I don’t need life insurance.
Fact: If you’re a stay-at-home parent, you don’t bring in an actual wage, but you certainly provide services that may cost a lot of money to replace, such as child care, daily transportation, cooking and more. Life insurance benefits can help replace some of these costs.
Myth 10: Life insurance does not cover death by suicide.
Fact: Life insurance actually does often cover a policyholder’s death by suicide in many situations. Frequently, however, life insurance agreements include contestability and suicide conditions which must expire before the payout would be paid out. This term is normally two to three years, however beneficiaries may receive the death benefit once the clauses expire.
Myth 11: If you have health difficulties, you cannot receive life insurance.
Fact: While health is typically utilised to compute rates and coverage amounts when deciding a policy’s premium, it doesn’t mean that life insurance is out of the question with a pre-existing ailment. Guaranteed issue life insurance is a form of policy that skips the regular health conditions for life insurance policies.
These policies omit medical exams and employ only minimal medical questionnaires. Depending on the provider, the plan may need that you be at least a specific age, but aside of non-health limitations like that, these policies often make it easy to qualify. The negative is that they tend to cost more and have smaller coverages than certain more restrictive policy types.
The bottom line
The life insurance business has witnessed a lot of moving over the past couple of years, creating a minor dip in the overall growth trend. Many of the hurdles that prohibit people from acquiring life insurance policies are still in place, although there is some indication of greater access and understanding. The gap between how much coverage people have and how much they might require is still large.
Despite good industry data in many other areas, the overall percentage of Americans covered by life insurance fell by roughly two percent between 2021 and 2022. Despite this downward trend in policyholders, income has grown dramatically over the last three years.
