2021 set a record in the insurance industry which paid out $100 billion in life insurance benefits, as reported by the American Council of Life Insurers (ACLI). That amount represents an almost 11% increase over the benefits paid in 2020. This is the largest year-over-year increase (15.4%) since the influenza pandemic of 1918. The COVID-19 pandemic is likely to have contributed to the increase in payouts given that it led to 460,513 deaths in the United States in 2021 based on data from the Centers for Disease Control and Prevention (CDC).
Increased Life Insurance Purchases
Also potentially contributing to the higher payouts was the increase in life insurance purchases. In 2021, just under 48 million life insurance policies were purchased, a 6.1% increase over 2020 sales. That said, the dollar value of policies actually decreased by 1.3% to $3.3 trillion. According to ACLI data, the average size of a new individual policy purchased in 2021 was $189,830; up from $162,230 in 2011.
Employer Coverage Is Not Sufficient
Even with the increase in the number of life insurance policies purchased, many Americans still have no life insurance or if they do, it is insufficient. The 2022 Insurance Barometer Study conducted by LIMRA and Life Happens reported that 106 million adults lack life insurance or have inadequate coverage. Many rely solely on the coverage paid for by their employers which is not sufficient especially for individuals with dependent children and in many instances is not portable when you leave the employ of your employer.
Obstacles to Purchasing Life Insurance
Often standing in the way of individuals purchasing life insurance are misconceptions they have regarding it. For example, many young, healthy people believe that only middle aged and older people need life insurance. Many single people or married people with no children also do not see the need. Other common misconceptions about life insurance include: not needing life insurance if you have a high amount of savings, once children are adults their parents no longer need life insurance, beneficiaries will have to pay income taxes on a policy’s proceeds, and life insurance is too expensive. The truth is that all of these statements are false and life insurance is essential for all individuals and best purchased when one is young and healthy.
It is best to assess one’s personal situation to ensure that they have the right amount of coverage to protect their loved one’s should they die. Further, purchasing life insurance at a younger age is much more cost-effective than waiting until you are much older when the premiums will be considerably higher. An experienced broker can help provide the essential guidance regarding life insurance purchases.