Advisers missing opportunity as Gen Xers short on life insurance

Generation X investors are in a prime position to step up their life insurance coverage, but advisers are missing the boat on the opportunity. The 2008 recession left that group — born between 1961 and 1981 — with an median individual life insurance coverage shortfall of $448,996, according to an analysis by New York Life Insurance Co. and The Futures Co. A total of 1,004 people over age 25 were surveyed between April 24 and May 1. Participants were then segmented into groups according to age: Millennials, Gen X and Boomers. Participating Gen Xers had a median amount of $260,000 of life insurance coverage in place. According to their own self-reported needs, such as paying down mortgages or helping to cover the cost of sending a child to college, that figure should have been closer to $708,996, hence the $448,996 gap. Compared with five years ago, Gen Xers are now carrying even less life insurance coverage: Back then, they had a median coverage amount of $400,000, resulting in a shortage of $362,688. The biggest change between then and now is the likelihood that Gen Xers, like many other people in the years following the recession, have less money for discretionary purchases, noted Chris Blunt, president of New York Life's insurance group. It doesn't help that there are fewer people selling coverage, either. “The largest driver [behind this generation's coverage shortage], if I had to point to one, is that there are fewer people in the insurance business,” said Mr. Blunt. “There's a dramatic decline in the number of insurance agents, and there are fewer advisers, too.” To top it off, insurance has always been sold, not bought: Young prospects would rather not think about their own mortality. Mr. Blunt noted that misconceptions about life insurance run rampant among the mid-30 and 40-something set that make up Gen X. “One angle is, 'I have life insurance coverage at work,'” he said. But that coverage is gone once an employee leaves his workplace, and it isn't portable to a new place of employment. “It gives people the impression that they have more protection than they probably have,” Mr. Blunt added. He also noted that Gen Xers ought to take advantage of term insurance and consider upgrading to a permanent policy when they're in a better position to buy it. Indeed, those individuals still might need the coverage when they're older. “Eighty percent of term insurance lapses,” Mr. Blunt said. “The idea used to be that your kids will be out of the house by the time your term insurance is up. But [retirees] haven't been downsizing on their homes, and kids boomerang back.”