The 2022 Insurance Barometer Study, conducted annually by Life Happens and LIMRA, reveals that financial security is a concern for all generations, but one that can be addressed with a stronger understanding of life insurance and its value.
Life insurance provides a pathway to feeling financially secure, yet the life insurance need gap is larger than ever. This is largely due to not feeling knowledgeable about life insurance – whether cost-focused or uncertainty about who qualifies. It’s also exacerbated by our tendency to avoid tough conversations about death that lead to obtaining life insurance and establishing end-of-life planning proactively. When taken together, this uncertainty and avoidance allows the lack of coverage – and financial insecurity as a result – to persist.
Our research shows that financial insecurity persists across most demographic groups, yet one behavioral factor significantly reduces financial insecurity among our respondents: life insurance ownership.
Life insurance is a means of taking personal responsibility to establish financial security for your family, so you can have peace of mind that they’ll always be supported. Findings demonstrate life insurance provides a clear pathway to financial security, with 68% of respondents with life insurance policies in place reporting they feel financial stability, compared to just 47% for those who don’t have life insurance.
Despite this, there are still 106 million adults who are in need of life insurance or more life insurance coverage, which is driving the need gap – in other words, the difference between how much coverage people have vs. what they say they need – to the largest it’s ever been.
Almost half of respondents in this year’s Insurance Barometer Study say they are somewhat or not at all knowledgeable about life insurance.
The top reasons people give for not having any or enough life insurance are consistent across the board: expense, other financial priorities, and uncertainty about the type and amount of coverage to get. In reality, 80% of people overestimate the cost of a life insurance policy, with half believing it’s three times more expensive than it actually is.
Uncertainty is leading us to avoid important conversations
Understandably, most of us don’t want to talk about death. But that avoidance is resulting in a general unwillingness to have important conversations about end-of-life planning with our families. Because many Americans are putting off these tough conversations with loved ones, they haven’t prepared for the possible loss of a primary wage earner.
- According to our research, 40% of respondents say talking about death brings discomfort.
- At the same time, 1 in 10 people say if their household’s primary earner died, they would feel financial hardship within one week.
- 44% say it would take less than six months to feel financial strain.
- In all, only 1 in 5 people say they have a safety net of five years or more.
These numbers reveal a stark reality. Many of us, while figuring out how to navigate an incredibly difficult and emotional time in our lives, would soon be burdened by financial pressures.
The immediate aftermath of losing a loved one should be a time to grieve, not a time for worrying about your financial situation. That’s why it’s imperative to take action in the interest of your family’s future.
How to take action
Life insurance is the foundation of any strong financial plan, and results show it provides people with a sense of security and peace of mind that many of us are looking for, especially after the last two years. The lasting impacts of COVID remain at the forefront for many and serve as a clear reminder of the importance of preparing for what you can control.
In this year’s study, more than half (53%) of all respondents say they are now more health conscious. However, the pandemic does not have the same level of influence on end-of-life planning – just 24% of respondents say it compelled them to discuss end-of-life scenarios with their families. Our data also shows twice as many people made changes to benefit their own personal health than made changes to benefit the ones they might leave behind.
End-of-life planning is a critical component of establishing a comprehensive path toward long-term health and wellness for your family. Many of us are more comfortable discussing life scenarios that focus on health and longevity, and these can help us begin conversations with our loved ones more effectively.
Moving past discomfort is key
These conversations are difficult but essential. Data shows 31% of people say they are more likely to buy life insurance in 2022. Will you join them?