Life Insurance Awareness Month: Closing the Coverage Gap

At its core, life insurance is about more than a policy: it’s about creating stability, protecting loved ones, and ensuring that financial goals don’t unravel in the face of life’s uncertainties. Despite its importance, millions of Americans remain underprotected.

According to LIMRA, 42% of U.S. adults — more than 100 million people — say they need more life insurance coverage.¹ This illustrates the nation’s growing “coverage gap,” which leaves countless households financially vulnerable in the event of unexpected loss. For many, this gap reflects not a lack of concern, but a lack of understanding, with misconceptions about cost and coverage standing in the way of financial stability.

Misconceptions About Life Insurance

Much of the coverage gap is caused by misconceptions, and the most common one is cost. More research from LIMRA reveals that 72% of U.S. adults overestimate the cost of life insurance, with younger Americans often assuming it costs three times more than it actually does. In fact, healthy adults aged 18 to 30 have been found to overestimate the median cost of life insurance by as much as 10 to 12 times.¹ These misconceptions keep many Americans from pursuing much-needed coverage, even when affordable options are within reach.

Another persistent myth is that life insurance is only necessary for parents or primary breadwinners. It’s important for clients to understand that, in reality, life insurance can serve a variety of purposes, including:

• Protecting dependents like spouses, aging parents, or others
• Covering debts such as mortgages or student loans
• Creating a financial legacy for loved ones

Delaying life insurance in response to these misconceptions can be costly, as premiums typically increase with age and health changes. While it may feel like an uncomfortable or premature decision to clients, purchasing coverage early is one of the most effective ways to build a strong foundation for long-term financial wellness.

Employer-sponsored life insurance adds another layer of complexity. While workplace coverage provides a helpful starting point, relying on it alone often leaves many individuals unprotected. A study conducted by Guardian Life found that almost two-thirds of life insurance owners rely solely on employer-sponsored coverage, and half of those only have one or two times their salary in protection — far less coverage than even the lowest recommended amounts.²

Given these gaps, it’s clear that many Americans need additional guidance to fully understand and secure adequate coverage.

How Financial Literacy Improves Life Insurance Coverage

Findings from The College’s Retirement Income Literacy Study underscore the fundamental gap in financial literacy, including the topic of life insurance. Despite scoring relatively high compared to other financial topics, many individuals still don’t fully understand how life insurance fits into a retirement plan. Without literacy in these areas, families and individuals may continue to underestimate their coverage needs, leaving themselves vulnerable to financial shortfalls.

So, what can you do to close the gap? Guardian Life also found that individuals who work with a financial professional are more likely to both own life insurance and carry higher coverage amounts — resulting in greater protection overall.²

That’s why education matters. In-depth knowledge on the complexities of life insurance solutions, like that provided by the Chartered Life Underwriter® (CLU®) curriculum, equips advisors to address misconceptions and guide clients toward solutions that protect what matters most. By fostering understanding and encouraging proactive planning, advisors can help bridge both the coverage gap and the financial literacy gap.

More on Life Insurance and Risk Management

• Get more insights from the Retirement Income Literacy Study
• Specialize in life insurance planning with the Chartered Life Underwriter® (CLU®) Program