How Urgent Is Life Insurance for Americans? That Depends on COVID

Among the 55% of Americans who say they have life insurance, a quarter say they purchased or increased life insurance coverage due to the COVID-19 pandemic, a NerdWallet survey finds.

Erin El IssaDec 10, 2020
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The coronavirus pandemic has aimed a harsh spotlight on life’s precarity, and some Americans have responded by buying life insurance to provide their loved ones with financial support in the case of their death. According to a new NerdWallet survey, among the 55% of Americans who say they have life insurance — either through their workplace or an insurance company or broker — a quarter (25%) say they purchased or increased life insurance coverage due to the COVID-19 pandemic.

In a NerdWallet survey of more than 2,000 U.S. adults — among whom 1,078 have life insurance — conducted online by The Harris Poll, we asked about life insurance and why the pandemic inspired some Americans to get or increase coverage. We also examined why some U.S. adults thought getting life insurance was the right move and why others decided against it.

Key findings

  • Millions don’t have life insurance: About 2 in 5 Americans (39%) don’t have life insurance coverage, either through work or purchased from an insurance company. Another 7% aren’t sure if they have coverage.

  • COVID-19 inspires insurance sign-ups: One in 4 Americans who have life insurance (25%) say they purchased or increased their life insurance coverage due to the COVID-19 pandemic.

  • Younger Americans getting insured: Millennials (ages 24-39) who have life insurance are more likely than their older counterparts to have gotten or increased coverage due to the pandemic — 42%, compared with 30% of Gen Xers (ages 40-55) and 5% of baby boomers (ages 56-74).

  • Fear of and proximity to illness are motivators: For Americans who purchased or increased life insurance due to the pandemic, the top reasons for doing so were fear of being diagnosed with COVID-19 (30%) or knowing someone who was diagnosed with COVID-19 (29%).

  • Many cite dropping cases for dropping interest: Around 1 in 7 Americans who didn’t purchase life insurance through a company/broker (14%) considered purchasing life insurance due to the COVID-19 pandemic, but ultimately decided not to. More than a third of them (35%) say they decided against it because COVID-19 cases in their area started going down.

Parents, millennials get or increase coverage due to pandemic

The pandemic inspired some Americans to get or boost their life insurance. Of insured Americans, 13% say they purchased life insurance due to the COVID-19 pandemic, and an additional 12% say they increased their coverage because of it.

Parents of children under 18 are more likely to have life insurance than Americans without minor children (66% versus 50%). More than 2 in 5 insured parents of minor children (44%) say they purchased or increased their coverage due to the pandemic compared with just 13% of those without minor children. Insured millennials are more likely than their older counterparts to say they purchased or increased coverage due to the pandemic — 42%, compared with 30% of Gen Xers and 5% of baby boomers.

“The best time to purchase life insurance is when you’re young and healthy,” says Ben Moore, NerdWallet’s insurance specialist. “If you wait until you’re older or diagnosed with a chronic illness, premiums will be much higher.”

Fear of COVID-19 diagnosis biggest motivator for getting coverage

Among Americans who purchased or increased life insurance coverage in response to the pandemic, the biggest reason for doing so is a fear of being diagnosed with COVID-19 (30%). About the same proportion (29%) say they got or increased coverage because someone they know was diagnosed with COVID-19.

Close to 3 in 10 Americans who purchased or increased life insurance coverage due to COVID-19 (27%) say it’s because while they have life insurance through work, they felt it wasn’t enough. If you aren’t sure if your life insurance is sufficient, the amount of coverage you should get depends on several factors, including whether you have financial dependents, as well as your income and debt balances. You can use a life insurance calculator to determine how much coverage you should aim for.

Decline in COVID-19 cases leads to lessened interest in coverage

Around 1 in 7 Americans who didn’t purchase life insurance through a company or broker (14%) say they considered purchasing coverage due to the pandemic, but ultimately decided not to. Another 16% are still considering purchasing. For Americans who considered but ultimately opted not to get life insurance, the No. 1 reason they made that choice was that COVID-19 cases in their area started going down (35%).

A quarter of those who considered but ultimately decided against purchasing life insurance (25%) say it’s because it’s too expensive, and about the same proportion decided the coverage they have through work is sufficient (24%).

Among those who didn’t purchase life insurance, parents of children under 18 were much more likely than Americans without minor children to say they considered getting coverage due to the pandemic (52% versus 19%). Similarly, Black and Latino Americans who didn’t purchase life insurance are more likely than white Americans who didn’t buy to say they considered purchasing due to the pandemic (49% and 45%, respectively, versus 23%).

What uninsured or underinsured Americans can do

Consider your need for coverage, pandemic or not: While COVID-19 has certainly increased interest and urgency around life insurance, coverage is a good idea for many people, regardless of whether we’re experiencing a global pandemic. If anyone relies on your financial support, life insurance can provide that support if you aren’t around to do so. And even if you don’t have dependents relying on your income, life insurance can help your loved ones pay for end-of-life expenses such as funeral costs.

“If you were to die today, would there be a financial burden on someone else tomorrow? If so, then life insurance is probably a smart investment,” Moore says.

It’s also important to note that while fewer COVID-19 diagnoses in your area may provide you with some solace, cases have been ramping back up around the world.

Figure out what type of insurance is right for you: If you ultimately decide you want coverage, you’ll have to decide between term and permanent life insurance. Term life insurance lasts for a set period of time — say 10, 20 or 30 years — and pays out to your beneficiaries only if you die during said time frame. That means if you live longer than that, there’s no payout. However, it’s a more affordable option than permanent life insurance.

On the other hand, permanent life insurance covers you until the end of your life. There are several different types, including whole, universal, indexed universal and variable universal life insurance. Permanent life insurance is more expensive than term, but it builds cash value over time that can be used while the insured person is still alive.

“Term life is the most affordable option and will cover you until the kids have graduated or the house is paid down,” Moore says. “Permanent life is best if you need lifelong coverage and can afford the higher premiums.”

Learn how and where to start: Around 1 in 7 Americans who considered purchasing life insurance but decided against it (14%) say the reason why is that they didn’t know where to start. There are several factors you’ll want to consider when choosing a life insurance company, including cost of coverage, ability to pay claims and customer satisfaction. If you need help getting started, NerdWallet has rated the best life insurance companies, taking financial strength and any reported complaints about each company into account.

“The end of your life can be difficult to think about. But when you purchase a life insurance policy, you’re not only buying peace of mind, but also financial security for the people in your life who matter most,” Moore says.

Methodology

This survey was conducted online within the United States by The Harris Poll on behalf of NerdWallet from Oct. 29-Nov. 2, 2020, among 2,047 U.S. adults ages 18 and older. This online survey is not based on a probability sample and therefore no estimate of theoretical sampling error can be calculated. For complete survey methodology, including weighting variables and subgroup sample sizes, please contact Chloe Wallach at [email protected].