Last Updated: June 20, 2020
If you die, what happens to your family? If you’ve got insurance, you probably think they’re covered. After all, 57% of us have life insurance.
You might be very wrong.
Almost 40% of Americans will leave their families in financial distress when they die.
It’s not because they haven’t made provisions either. It’s more likely because 70% of us with life insurance are underinsured.
Are you one of them?
Find out by reading through the latest life insurance statistics.
They are an eye-opener:
Life Insurance Statistics (Editor’s Choice):
- 57% of Americans had life insurance in 2019.
- In 2018, 770 companies were selling life insurance in the United States.
- Only 30% of Americans with life insurance have sufficient coverage.
- 51% of Americans would rather discuss their insurance needs in person.
- 28% of millennials and 29% of baby boomers are happy to research and buy their policies online.
- 4 out of 10 Americans don’t have life insurance because they don’t qualify.
Is life insurance worth it?
We often see life insurance as a grudge purchase. You know that at one point or another, it will pay out. The problem is that you could easily pay premiums for thirty or forty years before you die. So, you might be asking yourself if it’s worth it.
The short answer is yes.
Let’s assume that you’re paying $100 per month. The average payout at this level for a healthy person in their 30s is $250,000.
Let’s say that you decide to save $100 per month instead. Assuming an interest rate of 2%, with interest reinvested, after thirty years, you’d have $49,536.78.
Life insurance facts for 2020 show that your insurer pays out a lot more than you’d earn by saving that money.
Life insurance in America is big business. That said, a large section of the population is unable to get insurance. This could be due to health reasons or immigration status. Combine that with the figures of those who are underinsured, and we have a serious problem – most Americans don’t make sufficient provision for their families when they die.
Don’t believe us? We don’t expect you to – the statistics speak for themselves. So, let’s dive right in and see what the facts have to say.
Life Insurance Facts
Life insurance can seem confusing. The concept itself is easy to understand. You pay a premium, and the insurance pays out when you die. Unfortunately, the full range of policies available today has muddied the waters a little.
Not that this has adversely affected the industry. The opposite is true – the life insurance industry in America is the largest in the world.
1. 57% of Americans had life insurance in 2019.
The most common reason for Americans to take out life insurance is to cover funeral expenses and repay debt. Next comes replacing the breadwinner’s income.
2. In 2018, 773 companies were selling life insurance in the United States.
The life insurance industry in America has been in a downswing for the last 19 years. The number of companies has been steadily decreasing since 2001.
3. Only 30% of Americans with life insurance have sufficient coverage.
(Source: Business Insider)
Only 6 out of 10 Americans have life insurance. Just 3 out of 10 are adequately insured. Essentially that means that 7 out of 10 American families will struggle after the death of the insured because there’s not enough money to settle all debts, funeral costs, and so on.
4. 51% of Americans would rather discuss their insurance needs in person.
(Source: The Dubs)
Insurance facts show that Americans prefer to discuss their insurance needs with a person. This is hardly surprising given that life insurance, in particular, is such an essential part of preparing for death.
5. 28% of millennials and 29% of baby boomers are happy to research and buy their policies online.
(Source: No Exam )
In a strange twist, just under a third of baby boomers and millennials agree that it’s better to buy their policies online. With comparison websites becoming a lot more accurate, comparing different policies and their benefits has become a lot easier.
6. 4 out of 10 Americans don’t have life insurance because they don’t qualify.
(Source: Venture Beat)
The US insurance market is highly competitive. Even so, companies are extremely strict about who does and doesn’t qualify. Those with chronic illnesses battle to get cover. Those with a terminal or critical illness will not get cover either. Illegal immigrants might also battle to get life insurance.
Life Insurance Trends
Technology will change the way we determine risk and pricing for insurance. At present, insurance is about repairing damage or being reactive. It works this way because it’s based on preset risk profiles.
Risk profiles are more generic because we had to process data manually. With artificial intelligence, though, all that is changing. AI can analyze thousands of records in seconds. In the future, we’ll see a more flexible approach to insurance.
We’ll see more rewards for taking healthy steps. Companies will be able to predict potential risks accurately. This could lead to us becoming better able to avoid those risks. That, in turn, might boost insurance interest throughout the population.
7. The global market size for improving the processing of insurance claims was $72.53 billion in 2020
The current advances in technology, particularly in the field of AI, Blockchain, and the Internet of Things, can potentially improve the claims procedure. In 2020, we saw $72.53 billion invested in projects to streamline the claims process.
8. Investments in the Insurtech industry have been increasing year-on-year since 2013.
Insurtech is an offshoot of the fintech industry. These companies use technology to boost efficiency and data collection. Funding dropped a little in the 2017/ 2018 period. Still, watch this space. This nascent field could well prove to be an industry disruptor. That said, the traditional insurance companies are showing interest, so we could see collaboration instead.
9. Automating claims could reduce costs for insurers by 30%.
The case for automation in this industry is strong — it will lower costs and reduce the time taken to process claims. It could also identify potential exploitation and fraud. Both insurers and clients will benefit.
10. 80% of customers are willing to use digital channels to conduct transactions and perform tasks.
Insurers are coming under increasing pressure from clients who want to be able to manage their policies online. With the pace of life being what it is, more consumers are looking for self-service options that save them time.
11. Spending on AI technology and software in the insurance industry is forecast to reach 571 million at the end of 2020.
It’s not a case of if AI will transform the industry, but rather when. Considering the potential benefits of automation, it makes sense for companies to invest in AI. This is in response to one of the main challenges facing the insurance industry in 2019 – fraud.
12. 5% of insurers in the United States used robotic automation for some of their claims procedures in 2018.
Don’t get too excited yet, though – we’re not heading into an age of automation just yet. In the same year, 70% of insurers had no intention of implementing robotic automation.
Types of Life Insurance
US life insurance industry statistics point to three broad classifications for policies in terms of the way that they pay. These policies can be further divided into three sub-categories, depending on the original type of policy.
Standard glossary of terms:
- Term: These are policies with an expiry date. They’ll cover you for a set period. When that period expires, so does the policy. These policies are less expensive, the downside being that you’re betting you’ll die before the policy expires.
- Whole: This policy pays out on death. As long as you keep paying your premiums, your cover remains in effect. The premiums are more expensive because the policy will, at some stage, pay out. These policies may accrue a cash value too.
- Universal: This policy is similar to the whole life one except that it’s more flexible. You can opt to adjust premium payments, death benefits, and so on. On the flip side, this policy is more expensive than term insurance. It’s also a complex policy.
- No-exam: This policy is for those who are not sure they can pass an insurer’s physical. With these policies, you don’t have to have a physical. Naturally, you’ll pay for that privilege.
- Individual: Individual premiums are the type you’re most likely to encounter. Here only the personal circumstances of the insured are considered.
- Group: Group policies offer benefits for a particular segment at a lower rate. Companies are essentially offering a bulk discount. They can do this because many members of the section will take up the policy.
- Credit: These policies cover the amount of your debt if you die. They are pricey because they decrease in value alongside your loan amount. Ceding a whole life insurance policy is often a more cost-effective way to cover your debt.
13. In 2018, companies issued $12,120,445 million worth of individual life policies.
According to the American Council of Life Insurers, this marked a 1.6% increase over the previous year and a 1.7% rise over 2008’s figures. Check out our coverage of personal finance statistics for more information.
14. Group life policies in America dropped by 12.4% between 2017 and 2018.
American insurers issued a total of $7,366,765 million worth of group policies in 2018. This number represents a 1.7% decrease since 2008. It seems fewer Americans believe that group policies are the best life insurance option for them.
15. The number of credit life policies issued in 2018 totaled $83,534 million.
The number of these policies increased by 7.4% between 2017 and 2018. The overall number issued since 2008, though, has dropped by 5.6%.
16. America has the largest life insurance market in the world.
Life insurance facts for 2019 show that America leads the way with the largest life insurance market. Japan and China come in second and third places, respectively.
17. Taiwan has the highest proportion of insurance to GDP globally.
Taiwan’s insurance policies, both life, and non-life account for 20.88% of the country’s GDP. This indicates that the Taiwanese take insurance very seriously. By contrast, America’s insurance policies account for 7.14% of its GDP. The average, globally, is 6.09%.
18. The average face amount of life insurance policies in the United States in 2018 was $168 000.
(Source: Statista/ Experian)
The average face value of policies does fluctuate year-on-year. The overall amount has, though, increased from $103 000 in 1997. Experian meanwhile pegs the average American mortgage value at $202,284 in 2019.
This suggests that the average family has a deficit of $34,000 before catering to other debt. Find out more about the average home insurance cost.
19. Permanent life policies may allow you to claim early if you develop a critical or terminal illness.
(Source: Investopedia )
This practice is known as accelerated benefits. The idea is that the patient gets to improve their quality of life, leading up to their death. It’s a good option for someone who is single or whose family is financially secure. Early drawdowns reduce the payout received on death.
20. Life insurance can include an investment aspect.
You can either choose straight life cover or opt to add an investment benefit to your policy. If you want the latter, you’ll pay a higher premium. The additional amount, however, will be invested. This amount accrues over time, and you can usually borrow against it.
It might make sense to incorporate an investment policy here, depending on how good the insurer is at managing investments. It could work out slightly cheaper because you’re only paying one set of management fees.
21. Group policies offer savings opportunities but come with significant risks.
The primary downside to group insurance is that if you change jobs, you lose your cover. There’s also a risk that you’re not getting the best deal possible. Insurance companies continually improve their product ranges to remain competitive.
They might not do that with existing group cover, meaning you might find a better deal elsewhere.
Senior Life Insurance
Thanks to advances in modern medicine, life expectancy rates in America have almost doubled in the last 160 years. Naturally, that’s had a knock-on effect in terms of population ratios based on age.
With seniors living longer, it’s evident that we need to rethink how insurance works. We might have to consider increasing the maximum age for seniors to apply for life insurance. Are we also going to have to reconsider how life insurance pays out?
Today it’s not uncommon for younger people to take out life insurance. The earlier they start, the better the deal they get. How viable this will remain in the future will have to be seen. Say, for example, that we’ll live 20 years longer than we would’ve before. That’s an additional 20-years-worth of premiums. If we take an average cost of $50 a month, that’s an extra $12,000 in premiums. Or, to put it another way, $12,000 that you could otherwise invest.
Insurance industry trends indicate that insurers must develop products that add extra value. In the future, we’re bound to start seeing the lines between life insurance and investment blending a little more.
22. The average American will live to a ripe old age of 78 today.
Just 160 years ago, you were lucky if you made it to 40. With life expectancies in the United States doubling, we’re going to have to start seeing an evolution in the way life insurance works.
23. The percentage of senior citizens in America doubled between 1950 and 2018.
In 1950, only 8% of our population were senior citizens. That figure stands at 16% today. Experts predict that the number will increase to 22% by 2050.
24. 7.64% to 12.14% of seniors are earning below the poverty rate.
This points to a need for more efficient financial planning. Women are more likely to live in poverty than men. Mistakes in calculating the level of cover needed to repay debt and settle expenses have a serious knock-on effect.
The wife might, for example, have to sell the family home to settle outstanding hospital bills.
The best life insurance for seniors incorporates a little extra cover for unforeseen expenses.
25. It pays off to start your life insurance as early in life as possible.
(Source: Policy Genius)
The average cost for $250,000 cover for a 20-year old is $17.82 per month. Put off getting life insurance until you’re 60, and your life insurance cost will be about $150.65 per month.
Assuming that both people die at 70, the 20-year old will have paid a total of $10,692 for cover. The 60-year old will have forked out a total of $18,078 over the ten years. It doesn’t pay to put off getting cover.
Interestingly enough, the same doesn’t hold true for the average car insurance cost. With car insurance, younger drivers pay higher rates.
Life Insurance Companies
Life insurance industry trends for 2019 show that the industry in the United States has had a bumpy few decades. Despite the country housing some of the largest insurers in the world, the industry has been in decline since 2001. As of 2018, the number of insurers had almost halved when compared to 2001 statistics.
Interestingly enough, though, the number of brokers has increased annually since 1960. Perhaps what we’re interpreting as a decline in the industry is more a case of mergers or buyouts of smaller companies.
26. The overall number of life insurers in the United States has been dropping steadily since 2001.
The number of insurers has almost halved since 2001 when there were 1,341 active insurers. In 2018, this number dropped to 773. Changes in the individual and family life insurance areas could have contributed here.
27. Insurance industry trends for 2019 show that two of the top ten insurers by market capitalization were American.
With a $42.4 billion market capitalization, Prudential Financial is the sixth-largest insurer globally. Aflac comes in seventh place with a market capitalization of $36.6 billion.
28. The AIA Group in Hong Kong is the world’s largest insurer.
With a market capitalization of $122.2 billion, the AIA Group is the world’s largest insurer. The other top life insurance companies don’t even come close.
29. The United States ranked as the top country in respect of premium writing in 2018.
In 2018, the premiums written stateside were valued at $593 billion. Japan came in a distant second with premiums valued at $334 billion. China took the third spot with premium values of $313 billion.
30. Prudential Financial had $577.91 billion in assets in 2018.
From the other largest insurers in the US, Metlife comes in a close second with $409.62 billion in assets. New York Life takes third place with $324.78 billion. Guardian comes in the last place with $75.59 billion in assets.
31. There were 1.2 million insurance brokers, agents and employees in the United States in 2018.
The number has been growing year-on-year since 1960. It has further remained fairly stable in the wake of the financial meltdown in 2008.
32. Prudential is America’s largest life insurer but not one of the best life insurance companies.
(Source: Policy Genius)
Information collected by Policy Genius shows that Prudential ranks tenth in the country in terms of customer satisfaction.
33. Marsh and McLennan Cos. Inc. is the leading brokerage firm globally.
This Chicago-based company dates back to 1871. Since then, it’s grown to become a multinational conglomerate. It has representatives in 130 countries. Their revenue in 2018 was $16.84 billion.
34. The number of mutual life insurance firms stateside decreased from 142 in 1950 to 109 in 2018.
(Source: Statista/ Investopedia)
A mutual life insurance company exists solely for the benefit of policyholders. Policyholders control it, and decide who can gain entry, claim, and so on. Life insurance facts for 2018 show a decline in the overall number of mutual insurance companies.
35. Insurers in the United States must keep cash reserves of 8% — 12%.
Insurers are required to keep cash reserves to guard against large claims. The 9/11 attacks illustrate why this is essential. They cost insurers $31.6 billion.
Companies might have gone under had the government not intervened.
History of Life Insurance
The history of insurance is an interesting one. The life insurance industry has been around for a lot longer than most people realize.
The first policy was issued in 1706 by the Amicable Society for a Perpetual Assurance Office. This worked slightly differently to insurance today.
Members of the society contributed monthly premiums. At the end of the year, the family of deceased members got a payment. The amount paid out depended on the contributions of the deceased.
The industry has evolved a lot since then is booming today.
36. Women typically pay 30% less for life insurance.
(Source: Policy Genius)
Historically women are considered less of a risk for insurers. They’re less likely to engage in risky behavior that could get them killed. Also, women tend to live longer than men, and this is reflected in lower premiums.
37. Being a smoker means paying two to three times the regular rate for life insurance.
(Source: Policy Genius)
On the plus side, after you’ve quit smoking for a year, you’re rated the same as a non-smoker.
38. Californians were the ones with the most coverage in 2017.
(Source: Policy Genius)
Californians purchased $452.38 billion worth of life cover in terms of the face values of policies.
39. Wyoming comes in as the state with the least amount of coverage in 2017.
(Source: Policy Genius)
Wyoming residents purchased just $5.1 billion worth of life insurance in 2017.
You’re probably wondering why there was such a massive difference in the figures for California and Wyoming.
It’s more than likely a result of the difference in the cost of living and average property prices.
40. The number of insured adults in America has dropped from 63% in 2011 to 57% in 2019.
(Source: Policy Genius)
Given the strength of the American economy at the moment, this doesn’t really make sense. We can’t say that high unemployment or a recession has caused this problem with the US economy having shown steady growth in the last few years. They also have a low unemployment rate.
41. The Presbyterian Ministers Fund, established in 1759, was America’s first life insurer.
This fund protected the families of deceased ministers. Today the landscape is very different. The industry as a whole had an asset base of $7.1 trillion in 2017.
While it seems morbid to think about death when you first leave school, it’s the best time to secure the best rates on a policy. As you grow older, your risk to the insurer increases and they adjust your premiums accordingly.
Putting off getting life insurance could be a costly mistake. The same goes for underestimating the amount of coverage that you need.
Did these life insurance statistics get you rattled?
If you don’t want to leave your family in a difficult financial situation after passing away, consider consulting an independent insurance broker. They can give you the choice of the best products for you across the industry.
See you around, on SpendMeNot.com, everybody!
There’s no set minimum age as such. You can take out life insurance on your child if you like. If you’re taking the insurance yourself, the requirement is that you must have contractual capacity. In other words, be legally able to enter into a contract. If you aren’t, your guardian will have to co-sign.
Brace yourself; it’s probably a lot more than you think. Start with ten to twelve times your annual salary. This should be sufficient to replace your income.
Want to score brownie points with your family?
Total the amount of outstanding debt that you have as a family. Then add that to the cover mentioned above.
Do see if your pension fund offers pension term assurance. This will cover your beneficiaries if you die before retirement. It’s not usually enough on its own, but every bit counts.
Also, don’t forget that you should review your cover at least once a year. It should increase as your income does. If you’ve paid down your debt, you can reduce your protection accordingly.
57% of Americans have life cover.
The average American has $168,000 in life cover.
If we look at life insurance ownership by age, the results are interesting. The answer might shock you. The most common age group for people to buy insurance is between 35 and 45. Millennials are the group least likely to consider life insurance important.
Life insurance statistics show that life insurance is, in essence, quite simple. You pay your premiums every month. As long as you continue to pay on time, your cover remains intact until you die. There are variations on this theme, but that’s the way it works in a nutshell.
If you die of natural causes, your beneficiaries receive the face value of the policy. In cases of accidental death, the companies often pay double the face value. We call this double indemnity insurance.
- Business Insider
- The Dubs
- No Exam
- Venture Beat
- American Council of Life Insurers
- Policy Genius