LIMRA: Life Insurance Coverage Gap up another $1 Trillion

The life insurance coverage gap has broadened from $15 to $16 trillion in three years, and life insurance ownership is at its lowest since 1960.

(Image source: LIMRA) 

Insurance executives, industry analysts, vendors and other observers have never been as optimistic about the capacity for technology to transform the industry as they are today—at least judging by the reactions this reporter receives when asking. However, the greatest benefits of technology may be some time in coming. One of the hopes for life insurance in particular, is that technology will make it a product that can be bought as well as sold, to reverse the old adage, but it remains a hope. In fact, the under-insurance problem—also known as the coverage gap—is worse than ever, according to LIMRA. The Windsor, Conn.-based insurance and financial services trade association, reports that the life insurance coverage gap is up $1 trillion from 2012.

A report published at LIMRA’s blog this morning notes that the life insurance coverage gap has broadened from $15 to $16 trillion in three years, and that life insurance ownership is at its lowest since 1960. The statistic is based on findings in LIMRA’s 2015 report, Closing the Life Insurance Gap One Household at a Time.

(Related: Technology Key to Tapping Millennials’ Propensity to Buy Life Insurance, Retirement Products)

Over half of people who manage household finances believe that their dependents would run into financial difficulty within months if they were to die unexpectedly, LIMRA says. Eighty percent of consumers misjudge the price for term life insurance, with Millennials overestimating the cost by 213%, and Gen Xers overestimating the cost by 119%, according to LIMRA’s 2015 Insurance Barometer Study. Ironically, many people continue to vastly overestimate the cost of life insurance coverage. That being the case, insurers should focus on educational efforts, LIMRA suggests.

Insurers have an opportunity to communicate to younger consumers that life insurance is probably much cheaper than they think, LIMRA implies, and implies that insurers should advise consumers generally that quitting smoking and otherwise staying healthy, buying a policy earlier in life, and keeping a good driving record are all ways to save on life insurance premium.

Greater Financial Demands

Americans’ ownership of life insurance is also affected by their having more financial demands than ever before, according to LIMRA. “Consumers cite the cost of cell phones, the Internet, and cable as necessities that prevent them from buying life insurance, according to LIMRA research,” the blog post notes. “Professionals can suggest ways that consumers can balance these short-term expenses with a longer-term investment in their family and in their financial security.”


Anthony R. O’Donnell // Anthony O'Donnell is Executive Editor of Insurance Innovation Reporter. For nearly two decades, he has been an observer and commentator on the use of information technology in the insurance industry, following industry trends and writing about the use of IT across all sectors of the insurance industry. He can be reached at or (503) 936-2803.

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