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Why aren't more Millenials and Gen Z buying life insurance?

The cheapest life insurance quotes go to those who shop young – compare personalized rates with us to secure the coverage you need today.

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In 2023, the insurance education organization Life Happens teamed up with the research organization LIMRA to conduct the 2023 Insurance Barometer study. Its results are notable for anyone in the insurance industry, particularly those involved with life insurance. 

The study addresses the questions: Are Millennials buying life insurance? Are Gen Z buying life insurance?

It found that while 52% of the general adult population owns life insurance, only 40% of Gen Z and 48% of Millennials have purchased this level of protection. 

The study went on to show that 49% of Gen Z and 47% of Millennials recognize the need to obtain or increase their life insurance coverage.

So if they don’t have life insurance, and they know they need life insurance, the natural question becomes: Why aren’t Gen Z and Millennials purchasing life insurance at the same rate as the general adult population? 

Let’s dive into the possible reasons. 

Key takeaways on life insurance for Millennials and Gen Z

  1. As a Millennial or Gen Z, there are two main types of coverage you can consider: term life insurance and whole life insurance. Most younger individuals opt for a term policy as it offers affordable protection during a time of need.

  2. There are many reasons Millennials and Gen Z are forgoing coverage. For instance, you may have different financial priorities, you may lack awareness, or you may assume it's just too expensive.

  3. You should highly consider your need for coverage while you're young and healthy. Besides the fact that it'll be far less expensive now, know that life insurance isn't just about you – it's also about protecting your loved ones.

Why do I need life insurance, anyway? 

Life insurance is a protection plan that provides financial support to your family or dependents if you pass away. It works by paying out a set amount of money, known as the death benefit, to the people you choose, helping them handle expenses like bills, loan payments, and funeral costs. Essentially, it's a way to make sure your family is financially secure and can maintain their lifestyle, even if you're no longer there to support them. It's essential if you have people relying on your income or if you have debts that could be a burden to others after your death.

Also read: What’s the difference between mortgage insurance and life insurance?

There are two main types of life insurance: term and whole life insurance. Term life insurance covers you for a specific period or term, like 10, 20, or 30 years. If you pass away during this period, your beneficiaries receive the payout. Term life insurance premiums are less expensive than whole life insurance premiums, but term life insurance policies do not build cash value. 

Whole life insurance covers the policyholder for their entire life (as long as the premiums continue to be paid) and includes a cash value component that policyholders can borrow against. Whole life insurance comes with higher monthly premiums, but it can be a helpful way to leverage funds for long-term investing, and it offers lifelong coverage without the need to worry about premium increases.

With all this information, let’s evaluate some of the reasons Millennials and Gen Z are not purchasing life insurance at the same rate as the general adult population

Financial priorities: Is life insurance necessary in Canada?

It’s no secret that Canadians are facing a cost of living crisis. We are seeing inflation rates far higher than the target of 2%. These rates began to increase significantly in May 2020 and continued to rise as a result of government spending on the management of the Covid-19 pandemic. Inflation reached a peak of 8.1% in June 2022, and while this rate has steadily decreased since, in December 2023 the Canadian inflation rate was still above target at 3.4%. 

In 2013, the average cost of a home in Canada was $365,700. The median after-tax Canadian income for Canadian families and unattached individuals was $68,400

In 2023, the average cost of a home in Canada was $705,000, while the median Canadian family income was $75,452. 

Let’s think about that for a moment. The cost of a home has increased by 92% over that 10-year period, while income has only increased by 10.3%. 

Life is far more expensive than it was, and for Millennials and Gen Z, many of whom dream of owning a home someday, saving for a down payment while managing the increased cost of rent, fuel, food, and entertainment puts life insurance low on the priority list. 

Lack of awareness: Life insurance needs analysis

One of the key reasons Millennials and Gen Z are less likely to purchase life insurance compared to the general adult population is a lack of awareness. The Insurance Barometer Study also indicates that a lack of understanding about insurance options and determining the best choice for their needs deters about a quarter of Millennials and Gen Z members from buying insurance. 

Many young adults need to be made aware of how much life insurance they will need. Approximately 42% of Millennials incorrectly assume that the life insurance provided by their employer (also known as group life insurance) is sufficient. However, this coverage usually only pays out one or two years of a person’s salary when they die, and this amount often falls short of meeting the needs of a family.

Perceived affordability: Should a young person get life insurance?

One contributing factor to Gen Z and Millennials purchasing life insurance less frequently is a misconception about its cost. Data from Life Happens reveals that about 55% of Gen Z adults and 38% of Millennials overestimate the cost of life insurance for a healthy 30-year-old, assuming it to be over $1,000 per year, whereas the actual cost is about one-fifth of that amount.

It's important to note that life insurance premiums are lower for younger, healthier individuals. This is because premiums are calculated based on an individual's risk to the insurance company. Younger people are less likely to die imminently than older people, so they pose a lower risk. Therefore, securing life insurance at a younger age can result in significantly lower premiums over time. As one ages they are more likely to develop health conditions causing their level of risk to increase, leading to higher premiums. Thus, purchasing life insurance early can be a financially savvy decision.

Affordable life insurance is only a few steps away.

The cheapest rates go to those who shop while they're young – compare personalized life insurance quotes and secure the coverage you need today.

Do I need life insurance as a millennial or Gen Z?

If you are a Millennial or Gen Z who does not have life insurance, it’s time to take action. If you are in this age group and are relying on the life insurance provided by your employer, it’s time to evaluate that coverage and consider whether it will truly meet the needs of your loved ones if you were to pass away tomorrow. 

It's smart for Millennials and Gen Z to get life insurance early because it's far less expensive when you're young and healthy. Plus, life insurance isn't just about you – it helps take care of your family or anyone else you care about if something unexpected happens to you. 

Life changes fast when you're young – you may get married, buy a home, or have children. Getting life insurance now means you're ready for whatever comes next. And a bonus: some life insurance plans can build up cash value over time, which could come in handy later in life. So, getting life insurance early isn't just about covering the 'what ifs’ – it's also a smart financial move for your future.

The bottom line

So, why aren't more Millennials and Gen Z getting life insurance? Well, it boils down to a few things. First off, life is expensive right now, especially in Canada. With the cost of everything from homes to groceries going up, it's tough to think about taking on another bill. But here's the thing: life insurance isn't as pricey as many young folks think. It's actually way more affordable when you're younger and healthier.

Also, a lot of younger adults just don't know enough about life insurance. They might think it’s far more expensive than it is, or that the coverage from their job is enough.

Life throws a lot of curveballs, and life insurance can be a safety net – covering loans, funeral costs, or just day-to-day expenses for your family if you're not around.

So, to all the Millennials and Gen Z out there: it's time to look into life insurance. It's not just another bill – it's a smart, affordable way to protect yourself and the people you care about, no matter what the future holds.

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