In the wake of the global COVID-19 pandemic, the importance of life insurance has become more apparent than ever to not just older Americans but also younger adults. A recent study conducted by non-profit LIMRA found that nearly half of all Gen Z (those roughly between the ages of 18 and 26) and Millennials (those roughly between the ages of 27 and 42), numbering some 53 million people, recognized the need for life insurance and believed they did not have enough insurance coverage. In this blog, we’ll delve into the reasons why these generations should seriously consider obtaining life insurance coverage and address the common misconceptions that may be preventing them from doing so.
Why Younger Adults are Underinsured
The pandemic has brought about a stark reminder of the fragility of life. Despite the growing awareness of the need for life insurance, many Millennials and Gen Z individuals remain underinsured or, in some cases, lack coverage altogether. There are several potential reasons contributing to this gap in protection.
- Misconceptions about Life Insurance: The uses of life insurance are often misunderstood, with many assuming it is only needed in the event of death. However, life insurance can fill various other needs, including access to cash value, lifetime access to benefits for long term care purposes, and leaving a legacy to an institution or charity.
- Affordability Concerns: Financial constraints and the perception that life insurance is expensive can deter younger generations from seeking coverage. The truth is that life insurance can be surprisingly affordable, especially when secured at a younger age and in good health.
- Employer Coverage Reliance: Millennials and Gen Z employees may rely solely on their employer-sponsored life insurance policies. While workplace coverage is a valuable benefit, it often falls short of providing adequate protection. Relying solely on employer-sponsored plans can leave individuals underinsured and vulnerable during job transitions or periods of unemployment.
- Procrastination and Future Planning: The “I’ll think about it later” mentality is common among younger adults, but procrastination can be costly when it comes to life insurance. Locking in coverage at a younger age generally results in lower premiums, making it a financially savvy decision.
- How Much Insurance is Enough: The above-referenced study found that 40% of Gen Z parents and 29% of Millennial parents didn’t purchase coverage because they didn’t know how much coverage they needed or what type of life insurance policy to buy.
Addressing Concerns and Taking Action
To bridge the life insurance gap among Millennials and Gen Z, it’s crucial that advisors and clients work together to debunk common misconceptions and encourage proactive financial planning. We need to be better as financial advisors in educating our clients, creating awareness and dispelling the myths surrounding life insurance. For clients, taking that first step during major life events, such as marriage, homeownership, or the birth of a child, are opportune times to reassess insurance needs. These milestones often bring increased financial responsibilities, making life insurance even more critical.
In a world that has witnessed the unexpected impact of a global pandemic, securing one’s financial future has never been more important. Millennials and Gen Z should recognize the value of life insurance as a proactive and responsible financial decision. By understanding the diverse benefits, and taking timely action, these younger generations can ensure a more secure and stable future for themselves and their loved ones.
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