Evolution of life insurance policies tailored for Generation Z and millennials
A new wave of life insurance buyers: Gen Z and millennials
Life insurance, once considered a humdrum affair for settled adults, is experiencing a revolution with Gen Z and millennials. These tech-savvy generations are tackling financial duties earlier, and they're seeking life insurance policies to secure their future. In contrast to their elders, they're embracing digital platforms, term life insurance, and proactive financial decisions.
Riding the financial storm
Millennials and Gen Z have faced financial turmoil since their early years. From weathering the remnants of the Great Recession to navigating global pandemics and persistent inflation, economic unrest has been a constant companion. This experience has cultivated a more cautious and proactive financial mindset.
Young adults face increased debt and climbing costs. Gen Z students carry student loans with a growning annual rate of 6.72 percent – higher than any other generation[1]. Simultaneously, living expenses have surged. Compared to millennials at the same age, Gen Z spends 31 percent more on housing, almost double on car insurance, and 46 percent more on health coverage[1]. This fiscal reality makes backup plans like life insurance feel less optional and more essential.
The 2024 Insurance Barometer Study by LIMRA/Life Happens found that while self-reported Gen Z life insurance ownership stands at 36 percent, half admit to having a need-gap[1]. Moreover, millennials express the highest level of concern on nine out of 15 financial factors[1]. Nearly half of Gen Z and millennials overestimate the cost of life insurance, believing it's over three times its actual price[1].
Lessons learned from the pandemic
The COVID-19 pandemic has irrevocably altered the way young people view the future. The realization that life can change drastically overnight feels all too real. This seismic shift has had financial consequences for Gen Z, with one in seven maxing out their credit cards, and delinquency rates on the rise[1].
In this context, life insurance is shifting from a mere precaution to a protector of the progress young adults are striving to make. Even without children or mortgages, many are searching for ways to offer peace of mind to their partners and families, not because they expect the worst, but because they've seen the rapidity of change firsthand[1].
The employer benefits gap
The advent of gig work has caused a shift in job stability and access to long-term benefits like group life insurance. More than 60 percent of gig workers use this income to supplement traditional jobs, and for 36 percent of millennials and 21 percent of Gen Z, gig work is their primary income source[1]. This change forces many young adults to explore individual life insurance policies.
The tech-forward approach
Once plagued by antiquated processes, life insurance companies are finally adapting to the digital age. Providers like Corebridge, Ethos, Ladder, and Lemonade now offer prompt quotes and 24-hour application turnarounds, appealing to the digital-native buyers[1].
A recent Corebridge study reveals that 46 percent of millennials and 40 percent of Gen Z would be more likely to purchase a policy if the application could be approved in 24 hours[1]. Tech-based platforms and streamlined applications are bringing life insurance to the fingertips of a new generation.
The cost confusion conundrum
Despite the advancements in accessibility, affordability remains a hindrance for potential buyers. While convenience is important, cost is equally crucial. Owing to misconceptions about the cost of life insurance, many young adults believe it to be more expensive than it actually is[1]. In fact, the Corebridge study found that 41 percent of Americans were unsure what a 20-year, $250,000 term policy cost for a healthy 30-year-old, and another 47 percent overestimated the cost[1].
This misconception keeps people from applying when they are young and healthy, when policies are the most affordable[1]. As education about actual pricing proliferates, younger consumers may realize the considerable savings to be earned by purchasing life insurance early.
Social media's influence
Financial influencers are making once-taboo financial topics more accessible, including life insurance. Nearly 81 percent of Gen Z and 75 percent of millennials turn to social media for financial advice[1]. However, it's essential to exercise caution when balancing information learned on TikTok or Instagram with guidance from credible sources and licensed financial professionals.
Some influencers promote life insurance as an investment tool, focusing on cash value components or high-dollar permanent policies. While cash value and permanent policies can indeed provide benefits, remember that life insurance is primarily designed to protect your loved ones – not replace your investment portfolio[1].
Real voices: The new wave of financially aware young adults
Whether driven by family influence, economic uncertainty, or a shift in life, these decisions reflect a generation increasingly aware of life's unpredictability and the financial consequences it can bring.
"My husband took out a Hanover life insurance and disability policy a year after we got married. We thought it'd be a good idea to get it while he was still young and in good health. My husband was 33 and I was 29. A nurse came to our house to take his blood samples and weight as part of the process. [We were] mostly preparing for the future to avoid unforeseen financial setbacks, and my husband wanted to make sure I'd always be okay financially. Part of the push was also from my father-in-law who recommended we do it while we're young too."
- Nadia, Senior UX Researcher for Bankrate
Nadia's story reflects a growing trend among younger adults: making proactive financial moves before major milestones like having children. Encouragement from family, combined with the desire to secure low premiums while healthy, can be a potent motivation.
"I wouldn't say there was much else that drove our decision to get life insurance before we had our daughter. We were both young and healthy at 28 and 29 years old, and while it would be tragic if one of us passed, one income would have been sustainable for the survivor. Our workplaces also provided a free basic life insurance package that worked for us at the time.
After we had our daughter, there was no question. We went for the highest payout option possible, so if one of us passed, the other could focus on her and not have to worry about paying off the house, affording groceries, etc. Especially with the way this economic environment has been going."
- Marlese Lessing, Small Business Loans Writer for Bankrate
Lessing's experience underscores the impact life events have on life insurance decisions. However, what sets this generation apart is the timing and urgency of the decisions. In an economic climate marked by inflation and uncertainty, young families are opting for maximum protection early on, mindful of the fact that it's one of the few ways to help safeguard their household's future.
When asked about purchasing life insurance, Brett Anderson, CFP®, ChFC®, CLU®, a financial planner at St. Croix Advisors in Minnesota, suggests considering: "Do I want to provide for the loss of my income to my spouse or significant other, or children, and for how long? Provide funds for children’s education, pay off the mortgage or other debts, or cover final expenses? You may not have all these financial responsibilities today, but you may down the road. You can lock in your life insurance now to protect your insurability. It's possible that later in life, one can become uninsurable due to health reasons."
Wrapping Up
Millennials and Gen Z aren't simply waiting for life to hand them milestones; they're demonstrating readiness to protect what they have already built. Whether it's the hustle of gig work, managing rising debt, or ensuring their loved ones aren't left in a bind, these generations are vocal participants in the life insurance conversation with new priorities.
However, the traditional method of marketing life insurance will no longer suffice if insurers are to earn their place in the financial journeys of young people. If they desire to resonate with this demographic, they'll need to revamp their strategies: less jargon, more clarity; less red tape, more relevance. It's no longer about persuading them that they need life insurance, but rather proving that the industry is prepared to meet them halfway.
[1] https://www.limra.com/Posts/PR/2024/Life-insurance-Selective-Usage-Study_Oct2024.aspx[2] https://www.bankrate.com/finance/insurance/life-insurance-millennials-gen-z-markets/[3] https://www.cnbc.com/2022/07/29/younger-workers-are-getting-life-insurance-and-finding-ways-to-avoid-the-middleman.html[4] https://www.forbes.com/sites/kenrapoza/2023/02/23/debt-delinquencies-among-young-adults-are-rising/?sh=6d293f4d189a[5] https://www.forbes.com/advisor/life-insurance/why-young-people-are-buying-life-insurance-more-than-ever/?sh=694ec739bea1
Millennials and Gen Z, due to their proactive financial mindset honed by economic uncertainties, are actively seeking personal-finance solutions like life insurance to secure their future. In fact, they're embracing digital platforms, streamlined application processes, and term life insurance policies to protect their budding households from economic challenges.
As they navigate rising costs related to housing, car insurance, and health coverage, life insurance starts to feel more essential than optional for these financially conscious generations. By addressing misconceptions about the cost of personal-finance products like life insurance, the industry can help convert potential buyers into policyholders who can benefit from its protection early on.
