Life Insurance: Who Has It When They Die?

Life insurance is an important financial tool that provides financial protection to those who rely on you in the event of your death. While it is a valuable part of an overall financial portfolio, a significant number of people do not feel they have adequate coverage. In the US, around 50% of people have some form of life insurance, with this number varying depending on age, gender, and other factors. For example, Baby Boomers have the highest rate of ownership, while Gen Z has the lowest. Additionally, women are less likely to have life insurance than men, and certain racial and ethnic groups have lower ownership rates. The cost of life insurance is often cited as a barrier to purchasing it, with many people overestimating the price of a basic policy.

Life insurance ownership by gender

Life insurance ownership statistics by gender reveal disparities in policy ownership between men and women. According to a 2023 study by the Life Insurance and Market Research Association (LIMRA), 49% of women own a life insurance policy, compared to 55% of men. Another source puts the gap even wider, with only 37% of women holding a life insurance policy compared to 50% of men.

For the fifth consecutive year, women are 11 percentage points below men in life insurance ownership rates, with 47% of women reporting they have life insurance compared to 58% of men. This gap is partly due to women undervaluing their household labour, which has a significant monetary value. A stay-at-home mom's labour, for example, is estimated to be worth a salary of around $184,000.

Women's life insurance ownership has decreased for the past five years, with 14% losing their coverage in 2020, 36% of whom cited unexpected job loss as the reason. Additionally, women are less confident in their knowledge about life insurance policies, with only 2 in 10 women considering themselves highly knowledgeable, compared to 4 in 10 men.

Men are more likely than women to view life insurance as a supplement to their retirement income, while women are more likely to prioritise burial expenses as a reason for purchasing life insurance.

Life insurance ownership by race and ethnicity

Life insurance ownership varies across different racial and ethnic groups. According to a 2023 survey, 8 in 10 Black Americans have life insurance, whether on their own or through work, while 7 in 10 White Americans do. This makes Black Americans the racial group with the second-highest ownership rate, after White Americans.

However, there are disparities in the median amount of coverage across racial groups. The median amount of coverage for Black Americans is $50,000, while for White Americans, it is $150,000. This disparity can be contextualized by the fact that 71.9% of White Americans own homes, compared to only 41.8% of Black Americans.

Differences in the perceived purpose of life insurance also exist between racial groups. White Americans are more likely to see it as a means of protection against unpaid debt, while Black Americans view it as a way to pass on generational wealth.

Furthermore, Black Americans who do not have life insurance believe that coverage costs are 30% higher than those of White Americans without a policy. This misbelief about the cost of life insurance is shared across all races.

In addition to racial disparities, there is also a gender gap in life insurance ownership, with women being less likely than men to have a policy.

Life insurance ownership by age

The percentage of people with life insurance tends to increase with age. According to the 2024 Insurance Barometer Study, Gen Z (ages 12-27) has a 36% ownership rate, while 50% of millennials (ages 28-43) own life insurance. Gen X (ages 44-59) and Baby Boomers (ages 60-78) have the highest ownership rates at 55% and 57%, respectively.

The 2023 Insurance Barometer Study found that a record-high proportion of consumers (39%) intended to purchase life insurance within the next year, with Gen Z adults (44%) and millennials (50%) expressing the highest intent. This study also revealed that parents of minor children were more likely to own life insurance (59%) than the general population (52%).

The percentage of life insurance ownership by age group is as follows:

• Gen Z (ages 12-27): 36%
• Millennials (ages 28-43): 50%
• Gen X (ages 44-59): 55%
• Baby Boomers (ages 60-78): 57%

In 2016, 45% of Americans in the Seniors group owned individual life insurance.

While life insurance ownership tends to increase with age, younger age groups feel a greater sense of urgency to purchase coverage. This may be due to a variety of factors, including increasing financial responsibilities and a growing awareness of the importance of financial planning.

Life insurance claims statistics

Life insurance is an important financial planning tool that provides financial protection to the families of the deceased. However, a significant number of Americans do not feel adequately covered by their policies. This gap between the coverage people have and the amount they need persists due to misconceptions about cost and a lack of awareness about the value of life insurance.

Claims and Benefits

According to the Insurance Information Institute (Triple-I), insurance benefits and claims totalled $831.9 billion in 2022. This amount includes death benefits, annuity benefits, disability benefits and other payouts. The largest payout in 2022 was $416.2 billion for surrender benefits and withdrawals from life insurance contracts made to policyholders who terminated their policies early or withdrew cash from their policies.

Age is a significant determining factor in life insurance costs. The premium amount increases by an average of 8-10% for every year of age. Age can also influence whether a person qualifies for life insurance coverage. The maximum age for approval ranges from 70 to 85 years old, and some policies have a minimum age requirement, typically 50 years old.

According to the 2024 Insurance Barometer Study, the percentage of life insurance ownership tends to increase with age. While Gen Z (ages 12-27) claims a 36% ownership of life insurance, 50% of Millennials (ages 28-43) own life insurance. Gen X (ages 44-59) and Baby Boomers (ages 60-78) claim the highest percentage of ownership at 55% and 57%, respectively.

Life Insurance Claims and the Industry

The life insurance industry has experienced fluctuations in recent years but is currently undergoing a positive shift. In the third quarter of 2024, the total US life insurance new annualised premium increased by 8% to $3.9 billion. The number of policies sold rose by 3% year-over-year.

Life Insurance Claims and Myths

There are many misconceptions about life insurance, including the idea that it is only for healthy, middle-aged adults. However, people of various ages and health statuses can find policies suited to their needs, although options may be limited for very young children or older adults, and premiums can be higher for those with health conditions or risk factors. Another myth is that beneficiaries will have to pay income taxes on the proceeds of a life insurance policy, but generally, the benefits received are not subject to income tax.

Life insurance fraud statistics

Insurance fraud is a widespread issue that has a significant financial impact on the U.S., costing businesses, insurers, and consumers billions of dollars each year. Life insurance fraud is one of the most expensive types of insurance fraud, resulting in losses of $74.4 billion annually. This includes lying on applications, forgery, selling fake policies, faking deaths, and agents not paying premiums.

• Life insurance fraud is the second most costly type of insurance fraud in the U.S., after healthcare insurance fraud.
• Life insurance fraud costs consumers an estimated $74.7 billion annually.
• Life insurance claims totaled $797.7 billion in 2022, up from $790.9 billion in 2021.
• Medical misrepresentation, agent fraud, and criminal fraud are the most concerning types of life insurance fraud.
• Approximately 1% to 3% of all life insurance claims are investigated for fraud or misrepresentation.
• 87.5% of life insurance companies have limited their offerings due to the risk of fraud.
• Life insurance fraud can lead to higher premiums for consumers and negatively impact the financial strength of insurance companies.

In addition to life insurance fraud, other types of insurance fraud include property and casualty fraud, workers' compensation fraud, disability insurance fraud, and disaster-related fraud. These schemes involve false claims, misclassification, arson, contractor fraud, and charity scams.

The impact of insurance fraud is not limited to financial losses. It also affects individuals, businesses, and insurance companies, leading to higher premiums, taxes, and inflation on consumer goods. To combat this issue, advancements in technology and anti-fraud detection systems are being utilized to identify and prevent fraudulent activities.

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