Americans know they should have life insurance—70% understand that it's important—but only half of adults own a policy, according to LIMRA. Additionally, even more Americans know that they do not have enough coverage to protect their loved ones. The 2024 Insurance Barometer Study, conducted jointly by nonprofit industry trade associations LIMRA and Life Happens, found that a record 42% of U.S. adults, or about 102 million people, say they either need life insurance or need more of it.

September is Life Insurance Awareness Month and provides an opportunity to dispel misconceptions and educate the many Americans who live with a life insurance coverage gap.

One of the biggest hurdles consumers face when it comes to buying life insurance is a lack of understanding and common misconceptions about the products and process. Only about a quarter of people feel confident in their knowledge of life insurance, according to LIMRA, and many who are uninsured or underinsured admit they don't know what type or how much coverage they need, which often leads to putting off the decision.

LIMRA research shows that the top reason people do not purchase life insurance is because they think it's too expensive. However, since LIMRA's first annual Insurance Barometer Study in 2011, consumers have consistently overestimated the cost.

The latest study shows that nearly three-quarters (72%) of Americans think a basic term life insurance policy costs more than it does. When asked how they came up with their cost estimate, more than half (54%) said it was based on “gut instinct" or just a “wild guess."

“The need-gap for life insurance is a knowledge gap," said Brian Steiner, executive director at Life Happens who points out that “44% of people admit being only somewhat or not knowledgeable at all about life insurance ... and we know people aren't going to buy what they don't understand or think they can't afford."

This lack of protection matters, because the study also found that nearly half of U.S. consumers would face financial hardship within six months if the primary wage earner were to pass away unexpectedly.

The study reveals that middle-income Americans—those with a household income of $50,000 - $149,999—represent the largest market opportunity for the industry. Four in 10 middle-income Americans, or 50 million adults, acknowledge that they live with a life insurance coverage gap. This group also expressed a greater intent to buy life insurance (54%) than the general population.

“Engaging the middle market continues to be a high priority for life insurers. These households are more likely to own life insurance and more likely to recognize the important role life insurance plays in their family's financial security," said John Carroll, senior vice president, head of life & annuities, LIMRA and LOMA. “Yet, like other consumers, they have little understanding about what and how much life insurance they should buy or how much it costs. This leads to indecision and inaction."

The need for life insurance is especially high among certain groups. Young adults, women, Hispanics and Black Americans are feeling the gap the most. The 2024 study found that 49% of Black Americans and 53% of Hispanics say they need more life insurance or don't have any at all.

Over the past 14 years, LIMRA and Life Happens have also consistently found that women are less likely than men to own life insurance. In 2024, only 46% of women reported having coverage, compared to 57% of men.

Younger adults, like Generation Z and millennials, are more likely than the general population to say they need more life insurance, making them a prime focus for the industry. Over 54 million young adults acknowledge they're living with a life insurance coverage gap.

Will Jones is IA editor-in-chief.