It’s estimated that 74 million Americans don’t have life insurance, with another 25 million admitting they need more coverage than what they already have.¹

The reason most don’t have enough – or any – coverage?

Perceived costs.

About 75% of Americans wildly overestimate the cost of life insurance. This overestimation is even more apparent in Millennial and Gen Z consumers, with healthy adults 35 and under overestimating the price of a life insurance policy by 6-12X the actual cost.²

These misconceptions create a self-imposed barrier to getting the coverage Americans need. But why does this myth persist – and what can be done to help bridge the gap between belief and reality?

As it turns out, the knowledge gap between what life insurance is and how much it costs is the primary driver for this misconception. In LIMRA’s 2025 Insurance Barometer Study, 41% of US adults say they are somewhat or not at all knowledgeable about life insurance.

This lack of product knowledge extends to understanding policy costs. When asked how people come up with their guesses for how much life insurance costs, 54% of respondents in the same study said they based their estimates on “gut instinct.”

So, what’s the bottom line? Consumers don’t know enough about life insurance as a product to confidently estimate their costs.

And with carriers often surfacing the cost of a policy only after a lengthy application process, it’s not surprising that consumers feel uncertain on how much they should budget for life insurance coverage.

What can life insurance carriers do to help bridge this gap between perceived and actual life insurance costs?

Highlight cost transparency: Carriers who do more to educate consumers on what goes into policy pricing can help close this knowledge gap for consumers. There are several factors that can influence the cost of a life insurance policy, including:³

·      Health – Healthy individuals tend to get more favorable policy rates than those who have multiple health conditions.
·      Smoking – Smokers usually end up paying more for coverage.
·      Gender – Women tend to pay less than men; for example, a 40-year-old healthy female policyholder could pay $46.31 for a 10-year term, $1 million life insurance policy, while a 40-year-old healthy male policyholder will pay $56.41 for the same coverage.
·      Age – Younger policyholders tend to get better pricing on life insurance coverage.
·      Policy structure – The type of policy, death benefit size, term length, and other factors can all play a role in how much a policy costs.

Show up where consumers are learning: Consumers are more interested in financial education than ever before, with 85% of US adults looking to learn more about personal finance.⁴

However, where they’re learning about these topics has shifted, with fewer adults (20%) turning to podcasts, books, social media, and TV/radio programs for financial information. That means more US consumers are turning to friends and family (43%), financial advisors (41%), financial websites (36%), and financial institutions (32%) for trustworthy advice.⁵

Gen Z adults (18-29) still prioritize getting personal financial advice from their social circles (57%); however, they are much more likely to seek financial education from social media sites like TikTok (42%).⁶

This means carriers who want to bridge the knowledge gap between perceived and actual policy costs should focus on delivering critical product education where their consumers are learning.

Make it easier to see costs at a glance: Because carriers typically surface policy pricing only after applications, carriers can use financial tools – like policy cost calculators – to help give shoppers a clearer picture of how much they could spend on a policy.

With 74 million Americans believing they can’t afford life insurance, it’s evident that carriers should prioritize closing the knowledge gap with better price transparency, as well as showing up where consumers learn about financial products like life insurance.

After all, when consumers feel uncertainty around how much life insurance costs, they’re more likely to continue to buy into this persistent misconception, leaving their families and assets unprotected and exposed to financial crisis.