Life Insurance Facts and Statistics 2025

Life Insurance: Facts, Statistics, and Addressing Common Myths

Life insurance is a cornerstone of sound financial planning, designed to offer vital financial protection to those who depend on you. Despite its importance, many Americans still lack adequate coverage. A significant percentage of the population recognizes the need for life insurance, yet they remain uninsured. This disparity prompts critical questions: Is the process too complicated? Is cost a major barrier? Bankrate delves into life insurance ownership, presenting key facts, statistics, and dispelling common myths to help you navigate this important aspect of financial security.

Key Life Insurance Facts and Statistics

The current insurance market in the United States reveals several key trends. The annual Insurance Barometer Study, jointly produced by LIMRA and Life Happens, provides valuable insights into the market landscape. Based on a January 2024 survey of adult decision-makers, the study highlights crucial information, including barriers to purchasing insurance, gender coverage gaps, and generational shifts.

Here’s a summary of key findings from this study:

• Insufficient Coverage: Approximately 22% of current life insurance policyholders feel their coverage is inadequate.
• Stable Need: The percentage of respondents acknowledging their need for life insurance has remained consistent since 2022, with 30% of non-owners expressing a need.
• Income and Insurance: Among individuals earning between $50,000 and $149,999 annually, 39% showed a need for additional life insurance, signaling substantial interest from middle-income consumers.
• Gender Disparity: Women are less likely to have life insurance than men, with a consistent 11-point gap over the past 14 years of the study.
• Generational Trends: Baby Boomers exhibit the highest rate of life insurance ownership. Gen Z, now entering the study’s demographic, shows growing interest in insurance.
• Diverse Needs: Black and Hispanic Americans report a greater need for life insurance than other groups.
• Financial Concerns: Millennials currently express the highest level of concern about financial matters.
• Cost Misconceptions: Around 72% of participants overestimated the cost of a basic term life insurance policy, a persistent miscalculation. A quarter of younger generations cite a lack of knowledge about life insurance products as a barrier to ownership.
• Community Trust: One in five individuals identifying as LGBTQ+ prioritize insurance professionals who share their sexual orientation or are known allies.

These statistics highlight a dynamic landscape for life insurance, characterized by stable trends and evolving attitudes towards cost and coverage needs across diverse demographics.

Life Insurance Ownership Overview

The 2024 Insurance Barometer Study reveals that around 51% of Americans own at least one life insurance policy, reflecting relatively stable coverage levels in recent years. However, the study shows that 42% of American adults either need to obtain life insurance or increase their existing coverage. This need-gap represents an estimated 102 million adults, inclusive of the uninsured and underinsured populations.

About 30% of those without coverage recognize they need insurance but haven’t purchased it, citing high costs, competing financial priorities, or uncertainty about coverage needs. Another 10% of existing policyholders believe they need more coverage, highlighting a significant opportunity for the life insurance industry to better assist its existing customers.

Life Insurance Claims Data

According to the Insurance Information Institute (Triple-I), total insurance benefits and claims reached $831.9 billion in 2023. This is an increase from $812.5 billion in 2022. These figures include death benefits, annuity benefits, disability benefits, and other payouts.

The largest payout in 2022 was $416.2 billion, representing surrender benefits and withdrawals from life insurance contracts.

Life Insurance Statistics by Age

Age is a significant factor in determining life insurance costs. Generally, premiums increase by about 8-10% for each year of age. Age can also impact eligibility. Depending on the policy type, the maximum age for approval ranges from 70 to 85. Some policies, such as guaranteed issue whole life insurance, come with a minimum age requirement.

Additional age-related statistics from the 2024 Insurance Barometer Study include:

• Life insurance ownership tends to rise with age.
• Gen Z (ages 12-27) have a 36% ownership rate.
• 50% of Millennials (ages 28-43) own life insurance.
• Gen X (ages 44-59) and Baby Boomers (ages 60-78) claim the highest ownership percentages, at 55% and 57%, respectively.
• Millennials and Gen X are more likely to own term life insurance compared to younger and older generations.
• 72% of Gen Z Americans are likely to own permanent life insurance.
• Gen Z represents the highest number of individuals needing more coverage, at 49%.
• Conversely, Baby Boomers show the smallest coverage gap, at 27%.
• The average U.S. life expectancy in 2023 was 78.4 years, a 0.9% increase from 2022.

Analysis of the Life Insurance Industry

Recent global events, such as the COVID-19 pandemic, have underscored the importance of financial preparedness for families. This increased awareness sparked a surge in demand for life insurance. The life insurance industry has adapted and expanded to meet evolving consumer needs with enhanced services and product offerings.

According to LIMRA’s findings, the life insurance industry’s landscape is changing.

• Overall Market Growth: The total U.S. life insurance new annualized premium increased by 8% during the third quarter of 2024 to $3.9 billion.
• Policy Sales Increase: The number of policies sold rose 3% year over year in the third quarter.
• Whole Life Insurance: Consumers have moved to potentially better-return products, slowing whole life sales due to high interest rates. Whole life new premium totaled $1.4 billion in the third quarter, down 1% from the prior year’s results.
• Term Life Insurance: In the third quarter, term life new premium totaled $739 million.
• Indexed Universal Life: Indexed universal life (IUL) new premium was $897 million in the third quarter, up 4% versus the prior year.
• Variable Universal Life: Variable universal life (VUL) new premium totaled $665 million in the third quarter, 41% higher than the third quarter of 2023. The number of policies sold rose 4% in the quarter.
• Fixed Universal Life: Fixed universal life new premium increased 13% year over year to $266 million in the third quarter. However, the number of policies sold dropped 9% in the quarter.
• Market Share: At 6.86 percent, New York Life has the largest market share of the life insurance industry for direct premiums written, followed by Northwestern Mutual (6.74 percent) and MetLife (6.34 percent).

Common Myths and Misconceptions About Life Insurance

Misconceptions and myths about life insurance are common. Life insurance is subject to as much myth and falsehood as any other industry. Many misconceptions revolve around cost, need, and policy specifics. Here are some of the most common:

1. Myth: Life insurance is only for healthy, middle-aged adults. Fact: People of various ages and health statuses can find suitable policies. Options may be limited for very young children or older adults. Premiums can be higher for those with health conditions. Getting quotes from multiple companies can be beneficial.
2. Myth: I’m single or married with no children, so I don’t need life insurance. Fact: It can be beneficial for individuals without children or a spouse. Benefits can cover outstanding debts and final expenses. Assess your personal finances to determine if life insurance is a prudent choice.
3. Myth: My student loans will be forgiven when I die, so I don’t need life insurance. Fact: Federal student loan debt is forgiven upon death. Private student loan debt may not be, so check with your lender.
4. Myth: My beneficiaries will have to pay income taxes on the proceeds of my life insurance policy. Fact: Generally, death benefits are not subject to income tax, but interest payments on top of the original policy amount may be taxable.
5. Myth: If I get a term life insurance policy, I can’t convert it to a permanent life insurance policy. Fact: It is possible to convert some term life insurance policies, but you should confirm with your agent.
6. Myth: Once my children are adults, I don’t need life insurance. Fact: Life insurance can cover funeral costs, pay state estate taxes, pay off debt, or provide a nest egg.
7. Myth: I don’t need life insurance since my savings is at a comfortable amount. Fact: Funeral costs, estate taxes, and debts can deplete your savings. It’s best to buy life insurance to cover these expenses.
8. Myth: I cannot afford life insurance. Fact: Many individuals overestimate the cost of a term life insurance policy. It can be very affordable.
9. Myth: I earn no income, so I don’t need life insurance. Fact: Stay-at-home parents provide services that would be costly to replace. Life insurance benefits can help replace these costs.
10. Myth: Life insurance does not cover death by suicide. Fact: Life insurance policies often do cover death by suicide, but there are specific conditions that typically apply, such as a two-year waiting period.
11. Myth: If you have health issues, you cannot get life insurance. Fact: Existing health conditions do not automatically disqualify you. Certain policies can accommodate those with health concerns, such as guaranteed issue life insurance.

The Bottom Line

The life insurance industry has seen positive shifts in recent years. Though barriers to purchasing persist, such as misconceptions about cost and lack of awareness, increased access to information and policy options are having a positive impact. Most types of life insurance coverage saw increases during the third quarter of 2024. The recent increase in policy sales suggests a revitalized interest in securing life insurance. This trend reflects a move towards greater financial security and preparedness among families and individuals.