Coverage Concerns And The COVID-19 Effect

Among all of the intense effects the pandemic has imposed, perhaps the most universal is also the most human — a greater-than-ever awareness of how fragile life can be. Intertwined with this reality is a deep sense of the need for financial preparation should the worst occur. The devastating economic fallout that has rippled through the U.S. further underscores this need to ensure that people have reliable safety nets “in case of emergency.”

It is noteworthy that the life insurance conversation fits both of these contexts. LIMRA’s life insurance research program, which has closely tracked the product for decades, has uncovered some interesting new findings from the pandemic. One relates to the presence of a “coverage gap.”

To explore this issue, it’s helpful to first step back for a moment. When we discuss the life insurance coverage gap today, we acknowledge that it was already a pressing challenge and a social concern before COVID-19 turned the world upside down. According to this year’s LIMRA-Life Happens Insurance Barometer Study, over the last decade, there has been a steady decline in the percentage of the U.S. population with life insurance coverage. This year, just 54% of Americans own the product in any form — individual, group or a combination. 

It is also valuable to clarify that the gap refers not only to people who are completely uninsured, but also to those who do have some insurance (yet not enough). Even those who are insured are typically underinsured. For example, earlier LIMRA research shows that households already owning life insurance still have an average need gap of nearly $225,000.

This was the general situation before COVID-19 entered our reality, ushering in an era of even more grave concern. To date, almost 7 million Americans have contracted the virus, and more than 200,000 have died from it. This tragedy can produce some overwhelming financial repercussions for the families these people leave behind. Consider that, according to our Barometer study, 44% of American families would face financial adversity within just six months if they lost their primary wage earner.

So, how has the pandemic — as both a human and an economic crisis — affected the American mindset?

LIMRA’s Consumer Sentiment Study reveals that general anxiety about COVID-19 is prevalent. Thirty-two percent of respondents are extremely concerned about it; an additional 26% are very concerned. Some people also express wide-ranging worries about the personal impact of the pandemic. For instance, 34% report they are extremely or very concerned about their household’s long-term financial security, and 34% say the same about their own physical health. 

Specific to life insurance, LIMRA research indicates that COVID-19 has increased consumers’ readiness to buy:

» 68% of recent buyers (those who already purchased coverage in the past 24 months) say COVID-19 makes them more likely to buy life insurance in the next 12 months.

» 22% of non-buyers (those who have not purchased any life insurance in the past 24 months) say the pandemic has increased their likelihood to buy the product.

What’s more, as the crisis wears on, there is evidence that consumers are becoming more concerned over time about having sufficient coverage. In March, 49% agreed they were concerned about having adequate life insurance. This proportion increased to 53% in May and to 58% in July.

Ultimately, under today’s difficult circumstances, it is more critical than ever for the life insurance industry to act on what consumers are telling us. They have articulated both a substantial opportunity and a real obligation to reach out to them to meet coverage needs and help ease their worries.

Alison F. Salka, Ph.D., is LIMRA senior vice president and director of research. Alison may be contacted at [email protected].