9 Life Insurance Facts

9 Life Insurance Facts
  1. 70 percent of people said they needed a life insurance policy in 2020, according to LIMRA.
  2. The same study found that only 54 percent of Americans actually had life insurance coverage.
  3. 29 percent of people prefer to purchase life insurance through an online form, an 8 percent increase since 2011, according to the same study.
  4. After-tax income for the life insurance and annuity industries fell 50 percent in 2020 compared to the previous year, according to S&P Global.
  5. The average cost of a life insurance premium for a 50-year-old is more than twice as expensive as it is for a 20-year-old, according to data from ValuePenguin.
  6. COVID-19 prompted 1 in 5 Americans to purchase life insurance, according to a recent survey by LIMRA and Life Happens.
  7. 33 percent of people don’t think they would qualify for life insurance, according to the same study.
  8. The above study also found that 50 percent of people overestimate the cost of life insurance more than three times what it actually costs.
  9. The average life insurance payout is roughly $168,000 in the U.S., according to data collected by Statista.

Average Life Insurance Cost

The cost of life insurance varies depending on your age, medical history and the type of insurance you’re looking for. For example, term life coverage will be more affordable than whole or permanent life insurance.

Term Life vs. Permanent Life
Term Life Insurance:Permanent Life Insurance:
  • Provides coverage during a specific time of your life
  • Terms often last 10, 20 or 30 years
  • More affordable than whole life
  • Never expires
  • Builds cash value
  • Can be up to 10 times more expensive than term life policies

No matter which type of policy you sign up for, you’ll have to pay an insurance premium each month to keep the coverage. Look at the average life insurance rates by age chart below to get an idea of how much you may pay per month.

Average Monthly insurance rates by age

This data was found by Policygenius using sample premiums for non-smokers with a Preferred health rating.

Average Life Insurance Payout

According to the head of customer acquisition at Haven Life, the average life insurance payout, or policy face value, at their company is roughly $618,000.

Keep in mind that every insurance company will likely have different averages based on their location and typical customer demographic. Data from Statista shows an overall average life insurance payout in the U.S. of $168,000.

Your payout value, or face amount, is the sum of money that will be paid to your beneficiaries if you pass away, so it’s important to determine how much you’ll want to leave behind. Maybe it will only be around $168,000, or maybe you’d rather leave closer to $1 million. Whatever you decide, make sure it’s right for your family and circumstances.

How Many People Have Life Insurance?

There are many long-term financial benefits to having life insurance, including tax-free payouts and accumulated cash value that can supplement retirement income. So how many people have life insurance and possibly benefit from such gains?

According to LIMRA, only 54 percent of Americans had a life insurance policy in 2020, even though 70 percent said they needed such insurance. This same study found that 39 percent of people had an individual plan and only 25 percent had an insurance policy from a group plan.

States With the Greatest and Least Life Insurance Coverage

While life insurance companies account for different shares of the market, the same is true for individual states. States with larger populations are more likely to have greater sums of money in the life insurance industry.

Below is a breakdown of the amount of life insurance purchased in each state in 2018, according to data from Statista. The amounts are in billions of dollars.

greatest and least life insurance coverage by state

Life Insurance Claims Statistics

Life insurance claims for 2020 totaled $747 billion, a $14 billion decrease from 2019 and a $35 billion decrease from 2018, according to data from the Insurance Information Institute.

Surrender benefits and withdrawals account for the largest portion of the $747 billion at a total of $323 billion. Disability, accident and health benefits account for $137 billion, and annuity benefits account for $86 billion.

Biggest Life Insurance Companies by Market Cap

Market capitalization is the total value of a company traded on the stock market. Companies with a large capitalization (often $10 billion or more) are more established and well known.

According to Statista, the two largest life insurance companies in the U.S. based on their market cap are MetLife at $53.57 billion and Aflac at $35.5 billion.

Largest life insurance companies by world region include:

largest life insurance companies around the world

Life Insurance Myths

When shopping for life insurance, it’s easy to be bombarded with information. Knowing what is fact and what is not can help you make a more informed decision about your life insurance policy.

Common life insurance myths you may come across include:
I can’t afford life insurance.
Why it’s false: As seen in a fact about life insurance above, roughly half of the U.S. population overestimates the cost of life insurance. If you can only afford a smaller coverage amount, you can always start with a smaller policy and work up to a larger one as your income increases.
My beneficiaries will have to pay taxes on money received from my life insurance policy.
Why it’s false: According to the Internal Revenue Service (IRS), life insurance payouts received from the death of the person insured are not taxable and won’t be considered part of your beneficiaries’ gross income. However, any interest that may accrue from the payout should be reported on annual tax returns.
I no longer need life insurance once my kids are 18.
Why it’s false:Life insurance payouts aren’t always just for replacing an income if you pass away. Payouts can also act as an inheritance for your grown children or help pay for final expenses or estate taxes.
I’m a stay-at-home mom with no income so I don’t need life insurance.
Why it’s false: While you may not have any income that will need to be replaced if you passed away, your loved ones would likely need someone to fill your role. For example, if you have young kids, the money from your life insurance policy could pay for childcare while your surviving spouse works during the day.
I’m not married and don’t have kids so I don’t need life insurance.
Why it’s false: Proceeds from your life insurance policy can help pay for your burial or any debts left behind so your loved ones won’t be burdened by these expenses.

Life Insurance and Other Coverage

There are many benefits to having life insurance, such as peace of mind knowing your family will be taken care of. However, there are also other types of insurance you should consider to make sure you’re prepared for any emergency.

Other insurance plans include health coverage, renters or homeowners insurance, dental insurance and car insurance. If you’re 65 or older, you can benefit from government-sponsored health coverage, otherwise known as Original Medicare.

Purchasing a life insurance policy is one of the best ways to protect your family if something were to happen to you. It’s also an essential part of any healthy retirement plan. If, after looking through these facts about life insurance, you have additional questions about different policies, talk with an expert to learn more.

Last Modified: November 19, 2021

13 Cited Research Articles

  1. IRS.gov. (2021, October 25). Life Insurance & Disability Insurance Proceeds. Retrieved from https://www.irs.gov/faqs/interest-dividends-other-types-of-income/life-insurance-disability-insurance-proceeds
  2. LIMRA. (2021, October 14). Life Insurance Is a Key Component of Middle-Income Families’ Financial Security. Retrieved from https://www.limra.com/en/newsroom/industry-trends/2021/life-insurance-is-a-key-component-of-middle-income-families-financial-security/
  3. Price, S., (2021, October 13). Average Cost of Life Insurance (2021): Rates by Age, Term, and Policy Size. Retrieved from https://www.valuepenguin.com/average-cost-life-insurance
  4. Ghambir, N., Shoenthal, R., (2021, June 18). Average life insurance rates 2021: how costs change by age, term, and policy size. Retrieved from https://www.policygenius.com/life-insurance/life-insurance-cost/
  5. Statista. (2019, October). Average face amount of individual life insurance policies purchased in the United States from 1997 to 2018. Retrieved from https://www.statista.com/statistics/254619/face-amount-value-of-individual-life-insurance-policies-purchased/
  6. Statista. (2019, October). Face value of life insurance purchases in the United States in 2018, by state. Retrieved from https://www.statista.com/statistics/207718/us-life-insurance-purchases/
  7. Statista. (2021, October). Largest life insurance companies worldwide as of October 2021, by market capitalization. Retrieved from https://www.statista.com/statistics/376359/largest-life-insurance-companies-by-market-cap/
  8. Dieker, N., (2021, June 17). What is the average life insurance payout? Retrieved from https://havenlife.com/blog/average-life-insurance-payout/
  9. LIMRA. (2020, June 2). 2020 Insurance Barometer Study Reveals a Significant Decline in Life Insurance Ownership Over the Past Decade. Retrieved from https://www.limra.com/en/newsroom/news-releases/2020/2020-insurance-barometer-study-reveals-a-significant-decline-in-life-insurance-ownership-over-the-past-decade/
  10. LIMRA. (n.d.) 2020 Insurance Barometer Study Executive Summary. Retrieved from https://www.limra.com/siteassets/newsroom/help-protect-our-families/consumer-insights/2021/january/exec-summ_2020-barometer-study---focus-on-life.pdf
  11. S&P Global. (n.d.). Industry Credit Outlook: SLIDES: Top Risks For The Global Insurance Industry. Retrieved from https://www.spglobal.com/ratings/en/research/pdf-articles/201117-slides-top-risks-for-the-global-insurance-industry-100047463
  12. Insurance Information Institute. (n.d). Payouts. Retrieved from https://www.iii.org/publications/2021-insurance-fact-book/life-annuity-financial-data/payouts
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