Life insurance can be a complex topic, but looking at some simple facts and statistics can help clarify it. Whether trying to determine what type of policy you need or how much coverage to look for, navigating life insurance is easier when you have a clear idea of what’s going on. get the facts and see which insurance beliefs are myths and which are true.
life insurance facts and statistics
- In 2022, 106 million American adults were uninsured or underinsured.
- 50% of Americans reported having life insurance in 2022. By comparison, 52% of Americans reported having life insurance in 2021.
- All income levels are now less likely to say they have life insurance coverage.
- More than 50% of Americans overestimate the cost of life insurance by 300%.
- 30% of Americans believe life insurance is only for end-of-life expenses, leading them to not purchase enough to replace income or enable wealth transfer.
- Life insurance premiums increased 21% in the second quarter of 2021, the largest year-over-year increase since the third quarter of 1987.
- gender, age, smoking, health, medical history, and other factors affect your life insurance rates.
- suicide clause refers to a clause that usually lasts about two years, in which an insurance company will not pay for death by suicide.
- Some life insurance policies exclude coverage if the insured died while committing a felony. Also, if the policyholder was killed by the beneficiary, benefits are generally not paid, which is known as the killer rule.
- more men say they feel very informed about life insurance than women, with a difference of 17%.
- 34% of 18-24 year olds have life insurance, while 57% of those 65 and older have life insurance according to limra insurance barometer study of 2022.
- Under-25s are the only group to have increased life insurance ownership since 2011.
- As of 2022, 27% of people age 65 and older reported having life insurance through an employer, eight percentage points less than the proportion reported in 2011. This indicates that there is a higher chance of that people have coverage after retirement age.
- Millennial and Gen X generations are much more likely to own term life insurance compared to younger and older generations.
- 72% of Gen Z Americans are likely to have permanent coverage, the most likely group of the generations.
- Gen Z represents the largest number of people who need more coverage, at 48 percent. comparatively, baby boomers show a need gap of 30 percent, the smallest gap of the different generations.
- average life expectancy in the us. uu. in 2021 it was 76.1, almost a full year (0.9) less than in 2020.
- Revenue-wise, the life insurance industry generated $945.7 billion in 2021, a 64% increase from $881.2 billion in 2020.
- $820 billion in direct premiums were written per line, life/annuity in 2021
- about four-fifths of life insurance premium income came from direct ordinary policies. the other fifth came from group life policies. this distribution has remained largely constant for at least the past three years.
- Other revenue streams for life insurance companies include net investment income, reinsurance assignments, separate account income and other income, totaling $307.8 billion.
- At 11.3%, metlife has the largest market share in the life insurance industry in direct written premiums, followed by equitable (9.6%) and prudential (6.9%) shares.
myths and facts about life insurance
It’s no surprise that accurate life insurance information is less common than life insurance myths. life insurance is as subject to myths and falsehoods as any other industry or knowledge base. Fortunately, unlike more esoteric matters, insurance policies and facts are backed by numbers and contracts. With that in mind, let’s review some of the most common myths about life insurance and learn what’s really going on.
Myth 1: Life insurance is only for healthy middle-aged adults.
Fact: You’re never too old or too young to buy life insurance. It’s true that your costs will generally increase as you age and that people with illnesses or certain risk factors may pay more, but there are life insurance policies available to everyone.
Myth 2: I’m single or married with no kids, so I don’t need life insurance.
Fact: Your loved ones can use life insurance benefits to pay off your debts, including student loans, mortgages, and auto loans. it can also be used to pay for your final expenses, such as burial.
Myth 3: My student loans will be forgiven when I die, so I don’t need life insurance.
Fact: To keep things simple, it depends on the type of student loans you have. Federal student loan debt is forgiven upon death or total disability, and family members are not responsible for it. In this case, the life insurance payment could be used for other things, such as living expenses or funeral expenses.
Private student loan debt can be different, and it’s not that simple. You’ll need to ask your lender if they offer student loan death forgiveness, which will give you a better estimate of how much life insurance coverage you need.
Myth 4: My beneficiaries will have to pay income taxes on the proceeds from my life insurance policy.
Fact: Life insurance benefits are generally free of income taxes up to a certain limit, according to the Internal Revenue Service (IRS). however, any interest payments in addition to the policy may be taxable.
Myth 5: If I get a term life insurance policy, I can’t convert it to a permanent or whole life policy.
Fact: It is possible to convert some term life insurance policies, depending on the policy you purchased. however, you should find out the details from your agent before purchasing your policy.
Myth 6: Once my kids are adults, I don’t need life insurance.
Fact: There are many advantages to having life insurance later in life, such as easing the burden of funeral costs, paying state estate taxes, paying off your debt, or simply giving your loved ones children a savings they can use to help support their own families.
myth 7: I don’t need life insurance since my savings are in a comfortable amount.
Fact: The national average cost of a funeral with a wake and burial is $7,848, according to the National Association of Funeral Directors. Your savings were likely for retirement, so your loved ones may have to pay for your funeral costs if there isn’t enough left. Plus, if you have debt, your estate will use your savings to pay it off, which could reduce the amount remaining for your beneficiaries.
myth 8: I can’t afford life insurance.
Fact: Consumers often overestimate the cost of a term life insurance policy. Many people are surprised to learn that a healthy 30-year-old could get a 20-year, $250,000 policy for just $13 a month. With this policy, beneficiaries would receive the full $250,000 (since most are tax-free) if they died between the ages of 30 and 50.
Life insurance can be very affordable, depending on the type and amount of coverage you need.
myth 9: I have no income. I don’t need life insurance.
Fact: If you’re a stay-at-home parent, you don’t generate an actual paycheck, but you likely provide services that could cost a lot of money to replace, like child care, daily transportation, cooking and more. life insurance benefits can help offset some of these costs.
myth 10: life insurance does not cover death by suicide.
Fact: Life insurance actually often covers the death by suicide of the policyholder in many cases. Frequently, however, life insurance policies include contest and suicide clauses that must expire before the benefit is paid. this period is usually two to three years, but beneficiaries can receive the death benefit once the clauses expire.
Myth 11: If you have health problems, you can’t get life insurance.
Fact: While health is often used to calculate rates and coverage amounts when determining a policy premium, it does not mean life insurance is out of the question with a pre-existing condition . Guaranteed issue life insurance is a type of policy that avoids the standard health requirements for life insurance policies.
These policies forgo medical exams and use only limited medical questionnaires. Depending on the provider, the plan may require you to be at least a certain age, but outside of non-health parameters like that, these policies generally make it easier to qualify. The downside is that they tend to cost more and have lower coverage than some more restrictive types of policies.
the end result
The life insurance industry has undergone many changes in the last two years, which caused a slight decrease in the general growth trend. many of the barriers that prevent people from purchasing life insurance policies remain, although there is some evidence of increased access and awareness. the gap between how much coverage people have and how much they might need remains significant.
Despite positive industry metrics in many other areas, the overall percentage of Americans covered by life insurance declined about two percent between 2021 and 2022. Despite this negative trend in policyholders, revenues have grown considerably in recent years.
how many people have life insurance
according to limra’s 2022 insurance barometer study, 53 percent of all people in the united states were covered by some form of life insurance in 2021. however, as of 2022, the gap between those who have life insurance and those who still need it are 18 points, more than double the 2011 gap.
Compared to 2021, the need gap has remained constant regarding the percentage of people who have policies. Of those insured, 26 million require more coverage than they currently have, but only 53 percent reported that they are likely to get more. The top three reasons found to be a barrier among consumers buying adequate life insurance or any other 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 totaled $790.8 billion, according to the Insurance Information Institute (Triple-I). Compared to 2020, when benefits and claims totaled $747.4 billion, the total increased.
This amount includes death benefits, annuity benefits, disability benefits, and other payments. the largest payout in 2021 was $367.2 billion for surrender benefits and life insurance contract withdrawals made to policyholders who canceled their policies early or withdrew cash from their policies.
life insurance statistics by age
One of the most significant determinants of life insurance costs is age. the premium amount increases on average eight to ten percent for each year of age. Age can also influence whether a person qualifies for life insurance coverage. while age may exclude you from some policies, other types are often geared toward seniors.
Other interesting life insurance statistics around age include:
life insurance industry statistics
The life insurance industry, like many others, has been through tumultuous times since the start of the covid-19 pandemic. Although the industry experienced some downturns during 2020, certain metrics (such as revenue) point to renewed growth during 2021.