The Millennial generation is now the least prepared for unexpected life events due to a lack of adequate life insurance coverage, according to the latest edition of New York Life’s Life Insurance Gap survey, released Nov. 13.
The survey asks Americans to compare how much life insurance they need, based on living expenses and plans for their loved ones, with the amount of life insurance protection they have in place. Millennials – who are age 22 to 37 this year – being the most exposed contrasts with the 2013 edition of the study, which found Gen X (38 to 53 years old this year) under the most pressure.
Millennials with life insurance have a self-reported life insurance gap of $352,000 in 2018, with enough life insurance protection in place ($100,000) to cover only 22% of their self-reported coverage needs ($452,000). The Millennial generation’s gap is sharply higher – 60% greater – than the gap for the general population, which is $210,000, enough to cover 49% of the average estimated need.
In addition, the survey findings illustrate that only 10% of Millennials have enough life insurance to cover 100% of their needs, which can include mortgages, funding retirements or financing a child’s college education. However, Millennials feel more financially secure than the overall population, with 81% saying they feel financially secure versus 76% of all respondents.
“While 10% of Millennials already enjoy the peace of mind that comes from taking a protection-first financial planning approach, too many members of this generation are starting a family or buying a home without access to replacement income if the worst were to happen,” said Brian Madgett, vice president, New York Life. “Life for young families is unquestionably busy and complicated, but there is security and peace of mind in looking beyond today, and knowing their loved ones are protected against future financial shocks.”
New York Life’s Life Insurance Gap survey examines the financial planning attitudes and behaviors of 1,738 Americans ages 25-70 who are married and/or have financial dependents, including 1,176 adults who have life insurance. The survey focuses on how much life insurance coverage Americans currently have in place and what they want their life insurance policies to cover in the event of the death of the breadwinner, resulting in a self-reported gap. Both the 2013 and 2018 gap surveys were commissioned by New York Life, the nation’s largest mutual life insurer.
Additional key findings from the Life Insurance Gap survey include:
- Despite feeling financially secure, 48% of Millennials are stressed about their current level of savings; 47% are stressed about planning for their future financial needs; and 40% are stressed about their current level of income and saving for their children’s education.
- 44% of Millennials are not financially prepared to deal with the death of a breadwinner and 42% are not financially prepared for the possibility of losing their job.
“Millennials are missing an opportunity to take a ‘protection first’ approach to financial goals such as saving for retirement or owning a home,” added Madgett. “Without life insurance, even the best laid plans can be ruined by the death of a breadwinner. The good news is that more than two-thirds of Millennials, who have the time and opportunity to better prepare themselves, say that having enough life insurance to protect their family is an important goal for them.”
Millennials in the hot seat compared to other generations
The gap for Millennials is significantly higher than other age groups. Gen X, on the other hand, reports a $253,000 gap (median amount of coverage in place $272,000 and self-reported coverage needs of $525,000), which is a 48% shortfall in coverage – a significant improvement from a 63% shortfall in 2013. Boomers report a $110,000 coverage gap (median amount of coverage in place $190,000 and self-reported coverage needs of $300,000), which is a 37% shortfall in coverage.
The 2018 study was conducted by Ipsos from June 12-26, 2018 on behalf of New York Life. For the survey, a sample of 1,738 adults between ages 25-70 from the U.S. was interviewed online, in English. This sample includes 1,176 adults who have life insurance and another 562 adults who have no life insurance coverage. To qualify for the survey, respondents had to be married and/or have financial dependents and have an annual household income of at least $50,000.
The 2013 survey was conducted by The Futures Company, an independent third-party research company, on behalf of New York Life. A total of 1,004 (unweighted) nationally representative online surveys were conducted from April 24 to May 1, 2013. Participants had to be at least 25 years of age, married or with financial dependents and/or have sole or shared household financial decision-making power, and had to have annual household income of at least $50,000.
Both surveys used generational information as defined by the Pew Research Center.
According to the survey, Millennial breadwinners reported a median of $100,000 in life insurance coverage. Respondents were then asked about the ways they planned to use their families’ life insurance coverage if needed. Options ranged from simply replacing the breadwinner’s income to covering retirement and college expenses. Based on the responses to these questions, the median amount respondents reported they would need from the breadwinner’s life insurance proceeds was $452,000. When contrasted with the $100,000 median amount of actual life insurance coverage, the typical Millennial American family faces a 78% gap between their financial goals and the money they would have available from their life insurance policies in the event of the breadwinner’s death.
About New York Life: New York Life Insurance Company (www.newyorklife.com), a Fortune 100 company founded in 1845, is the largest mutual life insurance company in the United States* and one of the largest life insurers in the world. Headquartered in New York City, New York Life’s family of companies offers life insurance, retirement income, investments and long-term care insurance. New York Life has the highest financial strength ratings currently awarded to any U.S. life insurer from all four of the major credit rating agencies**.
*Based on revenue as reported by “Fortune 500 ranked within Industries, Insurance: Life, Health (Mutual),” Fortune magazine, 6/1/18. For methodology, please see http://fortune.com/fortune500/
**Individual independent rating agency commentary as of 7/30/2018: A.M. Best (A++), Fitch (AAA), Moody’s Investors Service (Aaa), Standard & Poor’s (AA+)