Is There Really A Life Insurance Gender Gap?

Jan 29, 2020 | Personal Insurance

The simple answer is ‘yes’. However, a more relevant question remains – Why is there a life insurance gender gap to begin with? Sure, we’ve heard of a gender-based pay gap, which for a time was quite a hot topic, especially when Hollywood shone the spotlight with the likes of Charlize Theron, Natalie Portman, and other high caliber artists voicing out their dismay over the blatantly inequitable salary disparity in showbusiness. 

Gender Pay Gap Connection conducted an online salary survey between January 2017 to February 2019, capturing some 1.8 million responses. The results only reflected what we already know, a topic which once upon a time could only be spoken off in hushed whispers. Men were paid more, in fact, 21 percent more than what women took home. In terms of dollar value, women get only $0.79 for every dollar earned by their male counterparts. This moves up to $0.98 to a dollar if we compare men’s and women’s pay given the same job description and qualifications. Nonetheless, a gap definitely exists.

So, how do these figures help in explaining why there is such a thing as a gender gap in life insurance? Well, for one, women, given lesser spending power, are less likely to afford the same amount of insurance coverage purchased by men who are paid more. On a more technical note and in insurance parlance, the conventional wisdom in quantifying the insurable interest is by multiplying one’s income by 5 to 10 times. In employment insurance coverage computation,  1 to 2 times the salary is just about the standard. So, doing the math, and gleaning from the data of, that pretty much explains why the one earning more would have higher insurance coverage.

Insurable Interest

Investopedia describes Insurable Interest as an essential requirement for issuing an insurance policy that makes the entity or event legal, valid and protected against intentionally harmful acts. In layman’s terms, it is essentially the ‘why’ in securing insurance and another major determinant on the ‘how much’ insurance or protection is required.

In the event of the untimely demise or disability of a primary breadwinner, say a husband, the household budget becomes compromised. The loss of a loved one also results in the loss of a steady stream of income and consequently the capacity to pay for food, transportation, healthcare, school, and worse of all, housing. So the husband’s insurable interest is to guarantee that all these are covered for, should his ability to earn abruptly ceases. 

wife, on the other hand, may earn less or may not have any disposable income at all. But she plays a vital role in keeping the household organized and functioning, to say the least. So the loss of a mother may not necessarily equate, apples-to-apples, to the value of the loss of her husband. Regardless, there is still an economic value that can be assigned to such a misfortune. A 2012 annual survey done by estimates that a stay-at-home mother, should she get paid for such work, is worth about $113,000.00.

Yes, there may be someone else that can replicate the performance of these functions, such as a nanny, nurse, or babysitter but this will of course entail some sort of remuneration. So again, an insurance interest exists in this case.

Putting a Value to One’s Life

Life Insurance agency Haven Life recently released a study that looked at the correlation of gender, roles in the household, and life insurance. The main takeaway is that both men and women believe that their demise would have a substantial impact on their families’ quality of life. That is reason enough to secure adequate insurance coverage if only to ensure that the families that are left behind will not have to deviate from the kind of life they are used to.

In terms of roles played in the household, women take on an average of 6.44 roles, while men, not too far off, with a figure of 5.88. From this, it can be inferred that regardless of gender, both men and women are equally valuable and indispensable in terms of the roles being played out in the family.

However, despite this fact, only 67% of women surveyed have insurance, as compared to 79% of men. The dollar value, on the other hand, would very well highlight this disparity; Men have around $423 thousand in coverage whereas women would have only secured a little more than half that amount.

It can then be concluded then that women value their lives less than their male counterparts. The 2019 Women, Money, and Power study substantiates this, as it claims that 60% of female spouses defer to the male partner when it comes to decision-making, more so on matters pertaining to financial planning.

Bridging the Gap Through Information

Clearly, there is a divide when it comes to men and women purchasing life insurance. What could be done to address this? Well for one, to try to dismantle the age-old ‘Traditional Mindset’ where men are perceived as the primary breadwinner who plays a bigger and more relevant role in the household; and that women’s incomes are somehow of lesser importance in comparison.

Founder of Women in Protection group, Emma Thomson, offers an excellent observation. Primary breadwinners have the tendency to cease work in the eventuality that the spouse or partner becomes ill. Now, if say the wife becomes ill and unable to carry out her role in the household, an expensive option may be employed to make up for the void. The husband, may not want to continue working, for the meantime at least, and instead opt to take care of the wife. This would be a double-whammy in terms of continuity of the quality of life of that household.

Metlife, guided by its 6th Annual Study of Employee Benefits Trends, takes aim at the female working class, through their employers’ group life insurance programs. The idea is to push for inclusive financial literacy on the road to building stronger personal financial safety nets. They stress the need for personalized information and communication addressed directly to female employees. Key, of course, is costing information to assist in the decision-making process.

Zurich UK’s head of strategic partnership Rose St. Louis, notes that women prefer to understand all their options prior to making the decision to purchase. Financial planner Mia Kahrimanovic of Charles Stanley & Co. sees it boiling down to educating women. It is as she says, as easy as explaining how it works and how will it benefit them and their family.

Both an Opportunity and Threat

The gender gap in life insurance is a two-way street. On the part of insurance agencies, there is a huge opportunity to pursue if only to even out this great divide. Swiss Re Group estimates an additional 2.1 Trillion dollars in insurance premium by 2029, if such a gap is addressed. Even as increasing reforms and regulations on advancing gender equality are being set in place.

At the other end of the spectrum, families can see this in light of the need for added security and peace of mind. Studies point to a slight flaw in existing theoretical bases for valuing needed insurance coverage between spouses. Knowing full well that in correcting this, husbands and wives can sleep better at night.

Want to know more about how you can bridge this gap for your personal insurance needs? Give us a call at 1-877-658-2472 today for a free insurance review or, send us a message!

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