Life Insurance Statistics

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Published on March 15, 2024

The United States is the largest insurance market in the world today, with China and Japan being the second and third largest markets respectively.

The US insurance industry accounts for nearly 30% of the total amount of premiums written in the world, which shows the kind of impact this industry has on the country’s economy.

In this article, we will take a detailed look at the US life insurance industry statistics, what Americans think of life insurance, the use of technology by life insurance companies, and how the industry is likely to be shaped by emerging trends in the coming days.

The US Insurance Industry in Numbers

As of 2017, there were 5,954 insurance companies in the country, out of which 2,509 were property/casualty insurers, 907 were health insurers, and 852 were annuity and life insurers.
The total amount of premiums written by US insurers stood at $1.2 trillion in 2017, out of which 52% of the premiums were written by life and health insurance providers.
Insurance related activities generated over $600 billion and accounted for 3.1% of the nation’s GDP.
The total number of people employed by the US insurance industry in 2017 was 2.7 million, out of which 1.5 million people were directly employed by insurance companies and the remaining people were employed through agencies, brokering services, and other such enterprises.
The total amount of premium taxes paid by insurance companies in 2017 was $21 billion.

Reasons to Buy Life Insurance Coverage

Data from LIMRA’s Insurance Barometer Study shows that approximately 60% of people in the US have life insurance. 45% of the people have individual life insurance, 33% of the people have group life insurance, and 22% have both individual as well as group life insurance.

Studies also show that one in three families might not be able to meet their day-to-day expenses within a month of the primary breadwinner’s death. It goes to show the importance of life insurance – especially for working class and middle class families.

The general consensus among Americans is that life insurance is far more important for a married person than it is for an individual, even if they both come from the same financial background.

Similarly, a vast majority of the people are of the opinion that the primary breadwinner in a family should be sufficiently insured.

The most common reason cited by Americans for buying a life insurance policy is to cover their final expenses. Nearly 91% of the people believe that a policy which covers funeral expenses is absolutely essential.

Other common reasons for buying life insurance include:

To replace the income of the primary wage earner
To leave an inheritance for the family
To pay off the mortgage and other debts
To supplement their retirement income
To provide funds for their heirs to pay estate taxes
To provide for their children’s educational needs
The Problem of Insufficient Life Insurance Coverage

Despite the fact that the US life insurance industry is the largest in the world, nearly 40% of the country’s population does not have life insurance.

A study by LIMRA says that the coverage gap in the country (total amount of life insurance coverage required minus existing life insurance coverage) is estimated at $15 trillion, which is a humongous amount.

Among the 60% of the population with life insurance, one out of five people believe that they are not sufficiently insured. At the same time, they do not have a clear idea as to how much coverage they actually need.

Among married couples, nearly 33% believe that their spouse or partner should buy more life insurance coverage. 16% of them do not even know how much life insurance coverage their partner or spouse has.

The interesting point is that these numbers differ from one demographic group to another. For example, 21% of Boomers think that their spouse or partner should buy more coverage and 9% of them do not know how much coverage their spouse or partner has. The numbers are significantly higher for Gen Xers and Millennials.

Approximately 36% of Gen Xers think that their spouse or partner should buy more coverage and 19% of them do not know how much coverage their partner has. For Millennials, the numbers are 42% and 22% respectively.

Reasons for Not Buying Life Insurance

Cost

Cost is the number one reason cited by Americans for not buying life insurance. Approximately 63% of people believe that life insurance is too expensive and they cannot afford it.

The LIMRA study says that a significant percentage of millennials vastly overestimate the cost of term life insurance, without actually doing any research or talking to finance professionals.

When asked about the average cost of a $250,000 term life policy for a 30-year-old man (who does not smoke and has no health problems), millennials responded in the following manner.

44% of millennials think that the policy is likely to cost more than $1,000 a year.
17% of millennials think that the policy is likely to cost anywhere from $500 to $1,000.
13% of millennials think that the policy is likely to cost anywhere from $300 to $500.

The truth, however, is that the average cost of a $250,000 term life policy from a top rated life insurance company is only around $160, provided you qualify for the preferred plus risk class.

As you can see from the numbers listed above, people tend to overestimate the cost of life insurance by a wide margin. This seems to a particularly persistent problem with millennials, who have very strong misconceptions about life insurance in general.

Financial Priorities

Apart from cost, this is the biggest reason why many people are reluctant to buy life insurance. Nearly 61% of people say that they have major financial responsibilities which prevent them from buying life insurance coverage.

The most common financial responsibilities cited by people who do not have life insurance are listed below.

Living expenses (rent, mortgage, utilities, groceries, and so on)
Additional living expenses (cable, phone, internet, and so on)
Savings
Debt repayments (credit cards and personal loans)
Health expenses
Recreational expenses (movies, eating out, shopping, vacations, and so on)

Among these people, Gen Xers and Millennials tend to prioritize savings and debt management over life insurance.

Not Knowing Enough about Life Insurance

This is one of the reasons why many people, Millennials in particular, do not buy life insurance. Nearly 58% of Millennials, 39% of Gen Xers, and 29% of Boomers say that they have no idea as to how much life coverage they need or what kind of policy they should buy.

Thinking They Would Not Qualify for Coverage

This is basically an extension of the previous factor. A surprisingly large number of people mistakenly believe that they would not qualify for a life insurance policy. Data shows that 38% of Millennials, 19% of Gen Xers, and 16% of Boomers believe that they are unlikely to qualify for a life insurance policy.

Buying Life Insurance Coverage – Online Portals vs. Finance Professionals

One of the biggest advantages of living in the era of smartphones and social media is that you can get any information you want on any subject in a matter of minutes. The same applies to life insurance as well.

Data shows that over 50% of the people in the country go online and do some research before buying a policy. The numbers, as always, differ from one demographic group to another.

55% of Millennials, 43% of Gen Xers, and 38% of Boomers prefer to research online and buy the policy from an insurance agent or financial advisor.
28% of Millennials, 32% of Gen Xers, and 29% of Boomers prefer to research and buy the policy online.
14% of Millennials, 14% of Gen Xers, and 12% of Boomers prefer to research online and buy the policy directly from the company (either via email or phone).

The important thing to be noted here is that there has been a steady increase in the number of people who prefer to research and buy the policy online. This increase can be seen across different generations and demographic groups.

In 2016, 19% of Millennials and 26% of Gen Xers stated that they prefer to research and buy the policy online. In 2018, the number had increased to 28% and 32% respectively.

On the whole, between 2016 and 2018, there was a 7% increase in the number of consumers who prefer to research and buy life insurance coverage online.

Use of Insurance Comparison Websites

Data shows that the use of insurance comparison websites has been steadily increasing among young people.

49% of Millennials, 20% of Gen Xers, and 12% of Boomers visited an insurance comparison website after researching online and determining the amount of coverage and the type of policy they need.
15% of Millennials, 18% of Gen Xers, and 11% of Boomers visited an insurance comparison website before researching online or visiting any other website.
3% of Millennials, 7% of Gen Xers, and 5% of Boomers only visit an insurance comparison website before buying a policy.

Meeting a Financial Advisor or Insurance Agent

73% of Millennials, 64% of Gen Xers, and 69% of Boomers say that they would like to meet an agent or advisor before buying a policy. It’s worth noting here that a vast majority of these people do not have a personal financial advisor nor do they say that they need one.

What they are looking for instead is the personal touch – being able to talk to a real person before buying a policy. They want to get the expert opinion of someone who is knowledgeable about the industry before choosing a policy.

As insurance comparison websites become more and more sophisticated, the role of a financial advisor or agent could be replaced by online experts, with whom you can chat and interact before making a decision about your life insurance coverage.

The Need for Simplified Underwriting

An extensive underwriting process, which includes a medical exam, is something that many people do not seem to like.

The LIMRA study shows that 50% of people in the country are more likely to buy life insurance if there is no medical exam involved. Similarly, those who already have life insurance are likely to buy additional coverage if they do not have to undergo an exam again.

The entry of digital insurers like Haven Life, Ethos, and Ladder has also changed the life insurance industry for the better. Today, you no longer have to wait for weeks to buy a policy.

If you are young and healthy, you can apply for, get qualified, and buy a policy within a matter of minutes. It is a 100% online process, which does not involve an exam or a phone interview in most cases.

These companies use highly complex algorithms to analyze large amounts of data in real time and determine the insurability of the applicants in a fairly accurate manner. As a result, they are able to issue policies instantly.

Speed and Simplicity – What Customers Want

Three out of four people in the country say that they are interested in simplified issue policies, which can be purchased without going through a medical exam.

Traditional insurance companies which require all the applicants to undergo an exam and take two to six weeks to issue a policy are increasingly seen as outdated by many young people.

65% of people want insurers to offer easy-to-understand, transparent explanations regarding their risk classes and their product pricing. 45% of people say that they are interested in buying a policy without having a face-to-face conversation with a broker or a representative from an insurance company.

Summary

The US life insurance industry is in a strong position and continues to march ahead of countries like China and Japan, which are insurance giants in their own right.

Based on the findings of various studies, it can be safely concluded that a significant percentage of the population needs to be educated about life insurance.

The number of people who prefer to buy insurance coverage online is increasing by the day, which is something that traditional insurance companies should take notice of.

Medical exam remains an anathema for most people. Fully underwritten no-exam policies, like the ones offered by digital insurers like Haven Life and Ladder, are becoming more and more popular with young people.

Insurance comparison websites have a role to play in educating the uninsured and helping them to buy the coverage they need.