Life Insurance: Haven Life's Gender Gap Study

The existence of a gender gap in life insurance is a well-documented phenomenon. Research reveals that men are more likely to carry a life insurance policy than women. While 79% of women believe their sudden death would negatively impact their family, they are less likely to have coverage and place a lower financial value on their lives. This disparity is attributed to women undervaluing their household labour and the persistent gender pay gap, which results in lower earnings and, consequently, less coverage. The traditional method of determining life insurance coverage, which is based on a multiple of one's annual salary, further exacerbates the undervaluation of women's contributions. Recognising the financial value of unpaid caregiving and household work is essential to bridging the life insurance gender gap.

Women's unpaid labour is undervalued

This dynamic is reflected in life insurance decisions, where women undervalue their household labour and its monetary worth. A stay-at-home parent's labour, including housekeeping, cooking, and childcare, is estimated to be worth about $184,000 annually. However, women are less likely to have life insurance coverage, and when they do, they put a lower financial value on their lives compared to men. This is evident in the Haven Life survey, where 67% of women had life insurance, with an average coverage amount of $231,342, while 79% of men had coverage of $423,102.

The income gap between genders also contributes to the disparity in life insurance. According to the Pew Research Center, women earned 84% of what men earned in 2020. The wage gap leads to women valuing their lives less financially, which is further exacerbated by the traditional model of using salary as the primary indicator of life insurance coverage. This approach devalues the contribution of women, especially those with lower salaries or those who are stay-at-home parents.

To address the life insurance gender gap, it is crucial to recognise the financial value of unpaid caregiving and household work. The loss of a stay-at-home parent would create a significant financial burden for surviving family members, making life insurance essential. By understanding the true value of women's unpaid labour, we can work towards closing the gender gap in life insurance and ensuring that women's contributions are adequately recognised and protected.

Women lack financial literacy

The gender gap in life insurance is a well-documented issue, with studies consistently showing that men are more likely to have life insurance policies than women. This disparity cannot be attributed to a lack of need, as women's families would also suffer financially in the event of their sudden death. Instead, it seems to stem from a combination of factors, including societal expectations, the gender pay gap, and the undervaluing of women's household labour.

Women's lower earnings due to the gender pay gap lead to less coverage. Life insurance coverage limits are often a multiple of annual earnings, so when women earn less, they end up with smaller coverage amounts. This is further exacerbated by the fact that women's unpaid labour, such as childcare and housekeeping, is often undervalued or not factored into coverage calculations at all.

The traditional model of multiplying one's salary by five to ten to determine life insurance coverage also disadvantages women, as it devalues the contribution of spouses with lower salaries or those who are stay-at-home parents. This approach fails to account for the significant financial value of unpaid caregiving and household work, which can amount to over $170,000 in annual savings for families.

To close the life insurance gender gap, it is essential to address the underlying issues of gender inequality, including the gender pay gap and the undervaluing of women's work, both in and outside the home. Women can also take steps to educate themselves about their life insurance needs and explore their options with the help of insurance professionals.

While the life insurance industry has begun to recognize the financial value of unpaid household work, more needs to be done to update the outdated models for determining coverage amounts. Life insurance professionals must check their biases and use more accurate methods, such as life insurance calculators, to ensure that families are appropriately covered, especially when one spouse is a caregiver.

Women are less likely to have life insurance coverage

This disparity is not due to a lack of need for life insurance among women. In fact, the opposite is true. In a survey from Haven Life, 79 percent of women said their family's lives would be substantially worse in the event of their sudden death. So, why are women less likely to have life insurance coverage?

One reason may be that women undervalue their household labor. Data suggests that women take on more household responsibilities than men, even when they work outside the home. Women's household labor, such as childcare, housekeeping, and cooking, has significant monetary value. A stay-at-home mom's labor is estimated to be equivalent to a salary of about $184,000 per year. However, women tend to undervalue this labor when considering life insurance.

Another factor contributing to the gender gap in life insurance coverage is the wage gap between men and women. Life insurance death benefits are typically based on annual salary. According to the Pew Research Center, women earned 84 percent of what men earned in 2020. As a result, women tend to value their lives less financially and may be less likely to purchase life insurance.

Additionally, women's lower earnings lead to lower coverage limits. Life insurance coverage limits are often a multiple of annual earnings. Using a common multiplier of 10, the average woman could end up with $925,600 less coverage than the average man.

Women's lack of financial literacy may also play a role in the gender gap in life insurance coverage. A study by FINRA found that women answered only 48 percent of financial literacy test questions correctly, compared to 58 percent for men. This lack of confidence in their financial knowledge may prevent women from getting the life insurance they need.

To close the life insurance gender gap, it is important to recognize the outsized contributions women make to their families, both financially and through unpaid labor. Women can help close the gap by assessing their life insurance needs using tools like the Life Insurance Needs Calculator and consulting with insurance professionals.

Men with life insurance value their lives nearly twice as much as women

The gender gap in life insurance is a reflection of the gender disparity in other areas of life. A study by Haven Life, a life insurance startup, found that men with life insurance valued their lives financially nearly twice as much as women. This is despite the fact that 79% of women and 78% of men agreed that their death would have a "substantial" impact on their family's quality of life. The study also revealed that women were less likely to have life insurance coverage than men.

The gender gap in life insurance is influenced by a variety of factors, including societal expectations, income levels, and household responsibilities. Women continue to bear a disproportionate share of household responsibilities, even as they make up nearly 48% of the US labor force. This dynamic was further exacerbated by the COVID-19 pandemic, which forced many parents to work from home. Despite these challenges, 59% of women reported doing more housework than their spouses, compared to only 20% of men.

The income gap between men and women also plays a significant role in the life insurance gender gap. While salaries for married men and women are becoming closer, there is still a long way to go. According to the Pew Research Center, women earned 84% of what men earned in 2020. This wage gap can contribute to a sense of lower financial value among women, which may explain why they are less likely to have life insurance.

The life insurance industry's traditional approach to determining coverage amounts can also contribute to the gender gap. The common practice of multiplying one's salary by five to ten can further undervalue the contribution of individuals with lower salaries or stay-at-home parents. However, the loss of a stay-at-home parent would create a significant financial burden on the family, as the value of their household work is estimated to be approximately $184,000 per year.

To bridge the life insurance gender gap, it is essential to address the underlying cultural and societal issues that devalue women's contributions. Additionally, individuals should consider the unique circumstances of their families when determining the appropriate level of life insurance coverage. By recognizing the financial value of all parents, regardless of their income or employment status, we can work towards closing the life insurance gender gap.

The gender pay gap

The traditional method of calculating life insurance needs, which involves multiplying one's annual salary by five to ten, further exacerbates the issue. This approach devalues the contribution of individuals, particularly women, who may have lower salaries or choose to stay at home to care for their families. The reality is that the loss of a stay-at-home parent would create a significant financial burden for the surviving family members, as the value of their unpaid labour is immense. Childcare, housekeeping, and other services provided by stay-at-home parents equate to approximately $178,201 to $184,000 in annual services.

To address this disparity, it is essential to recognise the substantial impact that all parents have on their families, both culturally and monetarily. By rethinking how we value caregiving roles and including these contributions in life insurance evaluations, we can begin to bridge the gender pay gap in this industry. Additionally, women can take proactive steps by assessing their life insurance needs using tools like the Life Insurance Needs Calculator and consulting with insurance professionals to ensure adequate coverage.

While the gender pay gap in life insurance is influenced by societal issues, it is also perpetuated by outdated industry standards. Life insurance professionals must acknowledge their own biases and work towards educating families on the true value of caregivers. By utilising life insurance calculators and considering a family's shared vision for the future, rather than solely focusing on relative income, the industry can help families make more informed decisions about their coverage needs.

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