In 2020, with COVID-19 top of mind for so many Americans, 10% of middle-income consumers purchased life insurance coverage for the first time, according to new LIMRA research.
One in five said COVID-19 prompted them to purchase coverage, and 29% said they were more likely to purchase coverage in 2021 due to the pandemic, according to the 2021 Insurance Barometer Study.
Middle-income families recognize the importance of life insurance. 70% of middle-income consumers (household income $50,000 to $99,999) believe they need life insurance coverage and more than a third (34%) say they plan to purchase coverage in 2021.
Research shows middle-income Americans are more likely to worry about burdening their loved ones with final expenses and leaving their dependents in a difficult financial situation should they die prematurely. The top reasons these consumers give for owning coverage support this.
The top reasons middle-income consumers say they own life insurance are:
- 55%: Cover burial and other final expenses
- 37%: Help replace lost wages/income of wage earner
- 32%: Transfer wealth or leave an inheritance
- 29%: Help pay off the mortgage
- 28%: Supplement retirement income
But perceived costs, other financial priorities and lack of knowledge about how much and what to buy continue to be obstacles to get middle-income consumers adequately insured.
A third (33%) don’t think they would qualify for life insurance. The reality is the large majority of middle-income consumers don’t understand the basic concepts around life insurance and three quarters overestimate the cost of life insurance. In fact, 7 in 10 middle-income Americans admit they are not knowledgeable about life insurance.
Middle-income families represent the heart of our nation and more than half of them (56%) have children under 18 dependent on them. Nearly half of these families (46%) say they would face financial hardship within six months should a wage earner die. Ensuring these families have the life insurance protection they need can help them maintain their homes and pay for living expenses after experiencing a tragic loss.
This coverage also can help the next generation by funding education. LIMRA advises that as advisors and agents continue to raise awareness about the life insurance coverage gap, make sure to focus on protecting these families.