The Underinsured Generation – Why Millennials Need Life Insurance
Source: https://www.voluntarybenefitsmagazine.com/
Chances are, you’ve heard of the “greatest generation” – the group of Americans who endured the Great Depression, fought in World War II and made countless contributions to the fabric of our nation. The youngest generation of American workers, millennials between the ages of 18 and 34, may rise to greatness too. One thing’s for certain, though: Millennials, or Gen Y, are the underinsured generation.
In addition to being underinsured, millennials are members of the “Peter Pan” generation and are more dependent on their parents than any previous group of young adults. In fact, according to a Pew Research survey, 36 percent live with their parents or grandparents – the largest percentage in four generations.1
Even young adults who aren’t living at home count on their parents for financial support, perhaps due to a combination of “failure to launch” and the economic recession. A recent study showed that less than half of adults ages 23 to 26 who are at least one year out of college have full-time jobs.2 While you might think parents would simply push their adult kids out of the family nest, many are willing to foot the bills: 27 percent of middle-aged adults are the primary source of financial support for an adult child, up from 20 percent in 2005.3
Millennials’ extended reliance on their parents may help explain why so many don’t have life insurance. But even those who have started families of their own are going uninsured. According to a LIMRA study, just 34 percent of millennials own life insurance. Still, there’s hope: The same study revealed that 39 percent are interested in purchasing life insurance within the next 12 months – and 1 in 4 prefers to purchase coverage through the workplace.4
Millennials’ interest in life insurance makes now the perfect time for human resources and insurance professionals to confirm the value of coverage. Since many of life’s major events occur between the ages of 18 and 35, communicating with millennials about the need for life insurance in terms of those stages is a smart move.
Single, but not Carefree
Single millennials may believe they have little need for life insurance. But an analysis of U.S. Census Bureau data by the Pew Research Center shows 1 out of 5 adults between the ages 25 and 34 live in multigenerational households. The median share of household income contributed by those individuals is almost 25 percent.5 Just imagine the financial blow of losing a quarter of the family income and how it would affect loved ones left behind. Life insurance benefits could be used to:
- Pay funeral and other burial expenses.
- Pay off creditors.
- Cover the federal and state estate taxes of those fortunate enough to have high-value savings or investments.
- Help siblings pay for college, provide parents with funds for retirement or finance a loved one’s personal dreams.
- Fund a scholarship or charitable program.
Married Without Children
When wedding bells ring, millennials should make sure everything they work hard for is properly protected – and that means it’s time for both spouses to apply for life insurance. As they make plans for the future as a couple, millennial newlyweds should ask themselves some hard questions, including:
- What would happen if one of us died?
- Would the survivor left behind suffer financial hardship?
Millennials should understand that marriage also signals a time for a health insurance review. Both may have group health insurance through work, so they should compare premiums and benefits to see if it’s more economical to maintain separate plans or to choose joint coverage offered at one of their workplaces. Since marriage is a qualifying life event, they can enroll in or change their health insurance plans outside the open-enrollment period.
Baby on Board
One of the last things new parents want to think about in the joyous months after a baby’s birth or adoption is life insurance. But for new moms and dads, it may be appropriate to increase their coverage to reflect new responsibilities. If the worst happens, life insurance benefits can pay for a child’s college education or help a surviving spouse continue to pay the mortgage or rent, consumer loans, business debt – the list is endless. Remember too that both parents should be insured. If a nonworking spouse dies, life insurance benefits can be used to pay child care and household expenses.
New parents will also want to add their babies to their health insurance policies. Some insurers require that additions be made within 30 days of birth. This includes both employer-sponsored plans andvoluntary plans.
A New Place to Live
Purchasing a home is a rite of passage for young adults, and it often raises questions about mortgage protection coverage. Lender-required MIP (Mortgage Insurance Premium) and PMI (Private Mortgage Insurance) protect lenders in the event of default, but they won’t pay off the mortgage if a homeowner dies.
Term life insurance is an inexpensive way for homebuyers to ensure their survivors have the funds needed to pay the monthly mortgage or even to pay off a home loan in its entirety. With term insurance, the policyholder selects beneficiaries and sets a coverage amount. And since a term life policy isn’t limited to a single purpose, its proceeds can be used not just to pay off a home loan, but also to help pay debts, personal loans, college costs or any other debt threatening survivors’ security.
Here’s another reason a new home should trigger a life insurance review: Relocation is often triggered by a promotion and accompanying salary increase. If that’s the case, millennials should consider protecting their family’s lifestyle by adding to their coverage.
The Bottom Line
Millennials may not own life insurance, but many are interested in coverage – and, specifically, in policies offered by their companies. That means the door is open for human resources experts and benefits professionals to communicate the value of life insurance and encourage enrollment.
By stressing the importance of coverage at various life stages, experts can help millennials understand how important life insurance is to their own lives and, more importantly, to the security of those who count on them for financial support.
About the Author
- Keith Pellerin, a 27-year financial and insurance industries veteran, is Aflac’s vice president of Product Management and Innovation. He oversees product strategy, development, design and implementation including competitive intelligence.
Visit aflac.com, call 1.888.861.0251 or send an email to addbenefits@aflac.com to learn more.
Sources
1 Pew Research Center, “A rising percentage of young adults live in their parents’ homes,” accessed March 2, 2015 –https://www.pewsocialtrends.org/2013/08/01/a-rising-share-of-young-adults-live-in-their-parents-home/
2 University of Arizona, “Life after college: Drivers for young adult success,” accessed March 2, 2015 –https://aplus.arizona.edu/wave-3-report.pdf
3 Pew Research Center, “The sandwich generation: Rising financial burdens for middle-aged Americans,” accessed Feb. March 2, 2015 – https://www.pewsocialtrends.org/2013/01/30/the-sandwich-generation/
4 LIMRA, “Majority of younger American adults would suffer substantial financial consequences if income were interrupted,” accessed March 2, 2015 –https://www.limra.com/Posts/PR/News_Releases/Majority_of_Younger_American_Adults_Would_Suffer_Substantial_Financial_Consequences_If_Income_Were_Interrupted.aspx
5 Pew Research, “Fighting Poverty in a Bad Economy, Americans Move In with Relatives,”https://www.pewsocialtrends.org/2011/10/03/fighting-poverty-in-a-bad-economy-americans-move-in-with-relatives/?src-prc-headline – accessed March 2, 2015