Despite basic awareness, life insurance gaps still plague Americans

A new study by Corebridge Financial reveals that while many Americans possess a basic understanding of life insurance, that still leaves a lot of room for client education and awareness-building.

According to the research findings released Wednesday, which draws on a survey of 2,204 adults conducted in June, 80 percent of Americans are aware that purchasing life insurance is most cost-effective when they are young and healthy.

Still, perceived cost remains a major barrier, with nearly half (45 percent) of those without coverage citing expense as the primary reason for not purchasing a policy.

“Life insurance is a cornerstone for a secure financial plan, but misperceptions around cost deter too many people from making this important protection a part of their overall strategy,” Tim Heslin, president of life insurance at Corebridge Financial, said in a statement.

The research revealed an epidemic level of ignorance around the actual cost of life insurance. Only 11 percent of respondents accurately identified the monthly cost for a healthy 30-year-old to secure a 20-year, $250,000 term life insurance policy, which typically costs around $15 per month. Misconceptions about the price were common, with 16 percent of respondents expecting the cost to be more than triple the actual amount, and another 16 percent anticipating it to be more than double.

The survey also found a concerning level of uncertainty as nearly 60 percent of US adults either do not have coverage or are unsure if they do. There was also a significant gap in life insurance coverage, with 50 percent of respondents lacking a policy and an additional 9 percent unsure if they’re covered.

Tellingly, the likelihood of having life insurance appears to be significantly higher among those whose loved ones are insured. Nearly half (49 percent) of individuals whose spouses have life insurance also have coverage, compared to just 10 percent among those whose spouses are uninsured. Additionally, 43 percent of respondents listed as beneficiaries on another’s policy have purchased their own coverage, compared to 15 percent of those who are not beneficiaries.

The survey also shed light on the benefits people look for when they get life insurance. For nearly three in five respondents (58 percent), it was leaving money to loved ones after death as a key component of their financial planning. A further 71 percent acknowledged the value of living benefits from permanent life insurance, such as accessing cash value, supplementing retirement income, and managing financial challenges.

“When people think about life insurance, it’s the protection that life insurance provides for loved ones that typically first comes to mind, and rightly so,” said Heslin. “[But] permanent life insurance can offer a broad range of benefits that go beyond passing money down to your beneficiaries.”