Life insurance facts and statistics 2021

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Life insurance, and the decision to get a policy, is something many people consider so that their loved ones are protected in the event of their death. The industry can be confusing to many, and there may be some things about life insurance that you did not know.

In this article:

Life insurance facts and statistics

  • In 2020, 54% of Americans were covered by life insurance.
  • 50% of people overestimate the cost of term life insurance. Millennials, in particular, overestimate the cost by 213%.
  • The average premium for a male rises 258% between age 25 and age 50.
  • Gender, age, smoking status, health, medical history and other factors impact your life insurance rates.
  • The suicide clause refers to a clause that usually lasts about two years, in which an insurance carrier won’t pay out for death by suicide.
  • Some life insurance policies exclude coverage if the insured died while committing a felony. Additionally, if the policyholder was murdered by the beneficiary, the benefits are typically not paid out, which is known as the slayer rule.
  • A man’s average premium is about 12% more per month than a woman’s.
  • The number of consumers who prefer internet sales for life insurance increased from 17 percent in 2011 to 29 percent in 2020.

How many people have life insurance

According to LIMRA’s 2020 Insurance Barometer Study, 54 percent of all people in the United States were covered by some type of life insurance. The total percentage of market penetration for the life insurance industry is relatively stable, though it has been trending downward over the past decade.

2020 saw an industry-wide gain of at least two percent in the first half of the year, according to LIMRA. While exact data is not available, the latter half of 2020 saw continued growth in people applying for life insurance due to the pandemic.

Life insurance claims statistics

In 2019, insurance benefits and claims totaled $762.1 billion, according to the Insurance Information Institute (iii). Compared to 2018, when benefits and claims totaled $784 billion, the number decreased.

This amount includes death benefits, annuity benefits, disability benefits and other payouts. The largest payout in 2019 was $339.6 billion for surrender benefits and withdrawals from life insurance contracts made to policyholders who terminated their policies early or withdrew cash from their policies.

Life insurance statistics by age

One of the most significant determining factors in life insurance costs is age. The premium amount increases on average eight to ten percent for every year of age. Age can also influence whether a person qualifies for life insurance coverage at all.

Other interesting life insurance statistics around age include:

  • 33% of people feel they have a solid understanding of children’s life insurance, yet 47% agree there is a need for insuring a minor with a permanent policy when it is explained to them.
  • 42% of millennials estimate a $250,000 term life policy for a young, healthy individual would cost $1,000 or more when it is closer to $160 per year.
  • 38% of millennials refrain from purchasing coverage because they fear they won’t qualify.
  • 21% of baby boomers and 36% of generation X believe their partner should get more life insurance coverage,
  • The average life expectancy in the U.S. in 2020 was 77.8, down a full year from 2019.

Life insurance industry statistics

Average life insurance cost by company

Life insurance premiums are primarily based on life expectancy, determined by several factors, including gender, age, health, smoking, and more. Generally speaking, the healthier you are, the cheaper your premiums.

Another thing that affects your rates is the type of life insurance that you choose to obtain.

  • Term life insurance is typically least expensive because it lasts a set number of years with no cash value other than the death benefit.
  • Permanent life insurance lasts a lifetime and includes an investment portion. Because of this cash component, the cost for this type of life insurance is substantially more.

These are some average rates for life insurance from a few insurance carriers, keeping in mind that actual premiums will vary per individual:

Life insurance company Average cost of life insurance for 35-year-old female Average cost of life insurance for 35-year-old male
RiverSource $22.09/month $24.72/month
State Farm $28.07/month $30.02/month
Nationwide $20.34/month $23.63/month
Mutual of Omaha $21.29/month $24.51/month

Life Insurance Myths and Facts

Deciding which life insurance policy to purchase or even deciding to get life insurance at all can feel overwhelming, especially when consumers are often influenced by a lot of information, some of which is not based on fact.

You may have heard that life insurance is too expensive or only healthy people qualify, but often these things are not the truth or are only partly true. Here are several life insurance myths:

Myth 1: Life insurance is only for healthy, middle-aged adults.
Fact: You are never too old or too young to purchase life insurance. It’s true that your costs will increase as you age and that people with illnesses or certain risk factors may pay more, but there are life insurance policies available for everyone.

Myth 2: I’m single or married with no children, so I don’t need life insurance.
Fact: Your loved ones can use life insurance benefits to pay off your debts, including student loans, mortgages, and car loans. It can also be used to take care of your final expenses, such as burial.

Myth 3: My student loans will be forgiven when I die, so I don’t need life insurance.
Fact: To keep it simple, it depends on the type of student loans you have. Federal student loan debt is forgiven upon death or total disability, and family members are not responsible for it. In this case, a life insurance payout could go to other things such as living expenses or funeral costs.

Private student loan debt can be different and is not as cut and dry. You’ll need to ask your lender if they provide student loan death forgiveness, which will give you a better estimate of how much life insurance coverage you need.

Myth 4: My beneficiaries will have to pay income taxes on the proceeds of my life insurance policy.
Fact: Life insurance benefits are generally income tax-free up to a certain threshold, according to the Internal Revenue Service (IRS). However, any interest payments on top of the policy may be taxed.

Myth 5: If I get a term life insurance policy, I can’t convert it to a permanent or whole life policy.
Fact: It is possible to convert some term life insurance policies, depending on the policy you purchased. However, you should find out the details from your agent before buying your policy.

Myth 6: Once my children are adults, I don’t need life insurance.
Fact: Having life insurance later in life has many advantages, like relieving the burden of funeral costs, paying state estate taxes, paying off your debt or simply giving your children a nest egg they can use to help support their own families.

Myth 7: I don’t need life insurance since my savings is at a comfortable amount.
Fact: The national median cost of a funeral with a burial is $7,300, according to the National Funeral Directors Association. Your savings were likely for retirement, so your loved ones may have to pay for your funeral costs if there is not enough left over. Additionally, if you have any debts, your estate will use your savings to pay for those, which could reduce the amount left for your beneficiaries.

Myth 8: I cannot afford life insurance.
Fact: Consumers often overestimate the cost of a term life insurance policy. Many individuals are surprised to learn that a healthy 30-year-old could potentially get a $250,000 20-year level term policy for just $13 a month. With this policy, beneficiaries would receive the full $250,000 (as most are tax-free) if they were to pass away between 30 and 50.

Life insurance can be very affordable, depending on the type and amount of coverage you need.

Myth 9: I draw no income. I don’t need life insurance.
Fact: If you’re a stay-at-home parent, you don’t bring in an actual paycheck, but you likely provide services that could cost a lot of money to replace, such as child care, daily transportation, cooking and more. Life insurance benefits can help replace some of these costs.

Myth 10: Life insurance does not cover death by suicide.
Fact: Life insurance actually does often cover a policyholder’s death by suicide in many cases. Frequently, however, life insurance policies include contestability and suicide clauses which must expire before the benefit will be paid out. This period is usually two to three years, but beneficiaries may receive the death benefit once the clauses expire.

Myth 11: If you have health issues, you cannot get life insurance.
Fact: While health is often used to calculate rates and coverage amounts when determining a policy’s premium, it doesn’t mean that life insurance is out of the question with a pre-existing condition. Even further, there are some policies specifically built for consumers with pre-existing conditions, such as diabetes.

Additionally, suppose the individual is within the eligible age range, typically 40 to 85. In that case, they can consider guaranteed issue life insurance if they don’t want their medical information to be a factor at all.

Written by
Ashley Hubbard
Personal Finance Contributor
Ashley Hubbard has two years of experience in writing for insurance domains such as Bankrate.com, including auto and homeowners insurance. She has also worked in the industry as a collision estimator and in several auto body shops.