Study Reveals Life Insurance Coverage Gaps Threaten U.S. Household Financial Security
Research from The Ohio State University highlights significant gaps in life insurance coverage and financial preparedness among American households.
The study reveals that 56% of households with full-time workers and multiple family members lack sufficient financial resources to cover the loss of an income earner.
Life insurance ownership has declined sharply from 77% of households in 1989 to 52% in 2023, with even lower coverage rates among younger generations such as Gen Z and millennials.Analysis of 1,818 households identified only 11% meeting life insurance adequacy, 17.2% meeting net financial asset adequacy, and 15.65% achieving net worth adequacy. Over half failed to meet any adequacy thresholds. Adequately protected households tended to be older, had higher financial knowledge, accumulated more assets, and primarily owned term life insurance or a combination of term and cash value policies.
Households without adequate protection were younger, had less financial knowledge, were less likely to engage financial advisors, and included higher proportions of Hispanic and single/divorced/widowed individuals.
These findings point to socio-economic disparities impacting financial security.Life insurance product type correlated strongly with financial adequacy. Combined term and cash value policies were linked to the highest financial adequacy odds. Term-only coverage also showed stronger adequacy associations than cash value-only policies, indicating potential consumer under-insurance due to cash value policy premiums.
The study notes a disparity between objective financial knowledge and financial adequacy among working adults, whereas retired households benefit more significantly from objective financial literacy. Subjective financial knowledge and consulting professionals increased financial asset adequacy odds among working adults.
The research suggests current life insurance marketing and educational approaches may not effectively promote adequate coverage or optimum product choices. The predominance of cash value policy sales may conflict with consumer affordability and adequacy needs.Although foundational financial resources are essential, net worth and life insurance coverage together define household resilience to income loss. Persistently high household debt and financial vulnerability emphasize the critical role of life insurance in economic stability.The study used data from the 2022 Survey of Consumer Finances and applied complex statistical methods to assess financial adequacy measures. Limitations include the inability to track life insurance demand over time, account for Social Security survivor benefits, and differentiate individual household member coverage.
The paper was published open access in Financial Planning Review in 2025 by Ohio State University researchers Nam, Olsen, Loibl, and Scharff. No conflicts of interest were reported, underscoring the study's academic independence. This detailed analysis offers important insights for insurance professionals focused on market trends, product design, consumer education, and regulatory oversight.