The Gender Gap in Life Insurance

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Life insurance can be an uncomfortable topic, but it is a vitally important one. We live in a world where many of our financial obligations can and do outlive us. Life insurance provides a safety net for our loved ones when we are no longer with them. Insurance expert Laura Adams says, “Having life insurance is critical when your death would cause financial hardship for anyone you leave behind, such as a spouse, partner, child or parent.”

When we pass, our loved ones grieve. They grieve while they deal with the financial fallout that so often accompanies the death of a loved one. Not only can the expenses be overwhelming, but trying to deal with it all while grieving can be incredibly difficult. A reasonable life insurance policy can provide the funds needed to get through this time of sorrow without having to worry about the bills quite so much.

How does gender impact life insurance coverage?

Gender imbalances are still prevalent throughout society, often in places that people may not think to look. For instance, Haven Life reports that while women and men believe their deaths would impact their families equally, women were less likely to have life insurance coverage. Not only that, but when women did have life insurance, the coverage was for around half the amount that men had.

While this disparity may not be understood in full, statistics have provided some insight into the underlying causes.

The difference in how we value our lives

When it comes to financial weight, men and women value their lives differently in the United States. Some of these appear to be tied into long-standing social concepts around gender roles and the associated financial value of those roles. Specifically, the contrast of household roles with career/earner roles. In the Haven Life survey, 70% of men responded that they engage in building a career as compared to 50% of the women who responded. The survey took a closer look at household roles and revealed that 83% of women and 57% of men reported childcare as one of their roles. That 82% of women and 52% of men reported housekeeping as one of their roles. And that 90% of women and 67% of men reported laundry as one of their roles.

These numbers reveal a clear imbalance in how housework is performed within the united states and provides insight into how and why men and women place such different financial values on their lives. However, housework represents financially sound industries that support an incredible number of jobs within the United States. According to our insurance expert, Laura Adams, “Don’t make the mistake of thinking that you don’t need life insurance if you’re a stay-at-home parent. If you manage childcare, family finances and household chores, your work is valuable, and you should have adequate coverage.”

Childcare and household chores are a financially measurable type of work, as they can be measured against the rate at which professionals charge for such work. What this tells us is that the loss of someone who takes care of childcare and housework will lead to financial obligations on the remaining parent. As such, it is perfectly reasonable that stay-at-home parents consider taking out a life insurance policy.

The income gap and life insurance

According to the Pew Research Center, in 2018, women earned 85% of what men earned. While this disparity is less than it used to be, a 15% difference is still significant. The last century has seen a dramatic increase in the ratio of women to men in the workforce. However, as the statistics above show, wages have not risen in tandem for men and women. It should come as no surprise that in a society where women are paid less on the dollar than men, that they value their lives less financially. Yet, the work done in the home contributes to significant financial savings for families.

No income should not mean no life insurance

While it may feel intuitive to think that life insurance is only to replace the lost income of a deceased family member, the truth is more complicated. According to Salary.com, it would cost close to $180,000 a year to replace the work done by a stay-at-home parent. This means that unless the surviving family members can afford an extra $180,000 a year in expenses, life insurance for that stay-at-home parent can be a saving grace for those who remain.

When comparing the cost of life insurance to the value, Laura Adams said, “Fortunately, term life insurance is more affordable than you might think. A healthy, 30-year-old can purchase a 20-year policy for $500,000 of coverage for about $200 per year.” So, even if you aren’t contributing directly to the family income, the work you do at home can be covered for an affordable price.

Why do women need life insurance?

Whether working on your career or taking care of your home and family, the work you do carries financial value. Traditional models of life insurance have used salary as an indicator of how much coverage one should plan for. However, according to the Haven Life CEO, “the industry’s conventional wisdom on choosing a plan amount is to multiply your salary by 5-10, which further devalues the impact of a spouse who has a lower salary or who is a stay-at-home parent.”

Further, Forbes stated in one of their articles that “[l]ife insurance professionals need to check their own biases and models around determining coverage needs so that the industry can do a better job of educating families and appropriately covering the contributions of caregivers.”

All of this strongly indicates that the industry standard is shifting in the direction of recognizing and acknowledging the financial value of work that is traditionally unpaid—specifically, that work which is done in the categories of housework and childcare. Independent of the industry standard, the reality is that the loss of someone who provides housework and childcare will create a significant financial burden on the surviving family members.

How much life insurance should you have?

Considering the changing culture of life insurance evaluation mentioned above, it can be challenging to determine how much life insurance you should have. Bankrate has provided an article on precisely this dilemma, aiming to help people answer this critical question. The short answer, though, is that you should have enough life insurance to cover the financial hardships that will be seen by your loved ones if you pass away.

Should both parents have life insurance?

Forbes reports that people tend to believe that having only one parent covered by life insurance will provide enough financial security in case of a death. However, Forbes further stated that believing this “undervalues the contribution of the other partner who might earn less or whose primary role is to care for children.”

The fact of the matter is that stay-at-home parents contribute roughly $180k worth of work each year. If treated like a salary, which is reasonable when calculating life insurance, it becomes apparent that it would take a staggeringly high income for the surviving parent to comfortably offset the financial obligations that will arrive with the loss of their partner. When looked at in this manner, it becomes evident that most families will benefit by having life insurance coverage for both parents.

How we can minimize the life insurance gender gap

Haven Life addressed the statistics revealed in their survey with a series of recommendations for working towards minimizing the life insurance gender gap, listed below. While these may seem like simple steps for a complex problem, they are a rational starting point. However, cultural change seems necessary for this gap to close. Specifically, women and men will have to value their lives at a similar financial rate and be provided equivalent pay for work. Beyond that, the viewpoints expressed by Forbes and Haven Life regarding updating the model for determining how much life insurance is reasonable will have to become more broadly accepted.

Haven Life recommendations

  • Understand what causes the life insurance gender gap
  • Consider life insurance coverage for both partners
  • Make sure you have the right amount of coverage for your family

The bottom line

Life insurance is a crucial safety net for your loved ones, whether or not you contribute significantly to the family income. Stay-at-home parents provide housework and childcare that equates to roughly $180,000 in services every year. Despite this number, women value their lives less financially, on average, than men do. This self-evaluation appears to be linked to the disparity between career-type work and homecare and childcare type work. Not only is the gender gap in life insurance entangled with the myth that stay-at-home work is not financially valuable, but it is tied to the gender income gap. When women receive less on the dollar than men for similar work, they are being told in numbers that they are worth less financially.

Despite these disparities and beliefs, the numbers are clear that families will benefit from women having life insurance, whether working for an income or not.