The Big Millennial Life Insurance Gap

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That’s the sobering news from New York Life’s 2018 Life Insurance Gap Survey. Millennials with life insurance have an average of $100,000 in life insurance protection in place, enough to cover one fifth (22%) of their self-reported coverage needs of $452,000. That’s a coverage shortfall of $352,000.

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“It’s not an issue of Millennials not wanting to get life insurance; it’s more a prioritization issue,” says Brian Madgett, who leads New York Life’s national life sales and its advanced planning group. “The concept of taking care of their families and loved ones is in competition with the big screen tv, car and even that daily cup of coffee.” Not to mention their student loan debt—and the desire to save for their children’s education.

Millennials—anyone born between 1981 and 1996, so ages 22 to 37 this year—report a 78% shortfall in life insurance coverage, according to the survey. By contrast, Gen Xers, born between 1965 and 1980, so 38 to 53 this year—report a 48% coverage shortfall. For Gen Xers, the median amount of life insurance coverage they say they have in place is $272,000, while they say they need $525,000. Baby Boomers say they have $190,000 of coverage but need $300,000—a 37% shortfall.

Madgett suggests using the life insurance gap data as a conversation starter over the holidays. Listen up when a family member says, “‘Hey, you need to take care of this,’” he says. I remember my dad nudging my husband and me to get term life insurance policies. We finally did when we had kids.

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Buying a home and having kids are the two big things that prompt people to get coverage. Get enough insurance to replace the lost income of the deceased, so the surviving spouse can carry on with paying the mortgage and saving for retirement. The American Institute of CPAs has a life insurance needs calculator to help you determine how much you really need.  If you have life insurance coverage at work, keep in mind that that policy might pay only one- or two-years’ salary, and it will likely end if you leave your job.

Term life is relatively cheap. You pay a set amount each year, typically for 20 or 30 years, for a guaranteed benefit (the tax-free payout if you die while the policy is in force). For a healthy 35-year-old male, it would cost about $250 a year for a 20-year level term policy with a $500,000 death benefit, according to Term4sale.com, where you can run your own numbers. Or go out 30 years until retirement, for $450 a year.

Buying younger lets you lock in a lower level premium. Buying longer can get you coverage through retirement. Premiums vary greatly for the same product from different insurers, so shop around. And make sure you assess the financial strength of the insurance company before you buy. The Insurance Information Institute has links to the ratings agencies and explains why you should check out more than one.

Ashlea Ebeling, Forbes Staff