Americans in their 20s and 30s don't have fundamental financial knowledge, according to a new survey,"Life and Disability Insurance: What 20- and 30-Somethings Think," by LearnVest.com and The Guardian Life Insurance Co. of America.
"The results of this study clearly underscore the need for practical, real-life financial literacy and empowerment," says Deanna Mulligan, CEO of Guardian. "We need to address this earlier in our schools and more often throughout people's lifetimes. There is a serious gap between the expectations of this audience and the reality they face, particularly when it comes to insurance. By filling these information gaps, we can empower young adults to take control of their financial future and reduce the possibility of placing undue financial burden on their loved ones."
The survey also finds 60 percent of respondents fail to understand the difference between term life insurance and permanent life insurance while 30 percent of respondents do not know what type of insurance they own. Another 19 percent of respondents are unaware of how their policies pay out.
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Among married and partnered respondents, 59 percent of respondents even realize their significant others have coverage. Of those respondents, 35 percent donot know what type of coverage their significant others have. Additionally, roughly one of five married and partnered respondents say they are not concerned with buying their own insurance policies because their significant others' insurance should be enough.
Despite respondents saying they value their incomes in this economy, 47 percent of respondents say they have emergency funds in place, but most don't protect this asset. While 57 percent of respondents have life insurance, only 35 percent of respondents have disability insurance. Reasons respondents don't have disability insurance are cost at 25 percent and the belief that their jobs don't pose physical risks at 21 percent.
However, according to the Council for Disability Awareness, slightly more than one in four of 20-year-olds will become disabled before retirement with freak accidents not being the primary cause. In fact, the most common disability causes are back issues, cancer, heart disease and other illnesses.
Although respondents report high levels of engagement when making other financial decisions, they dread shopping for insurance. Thirty percent of respondents even say they would rather get their teeth cleaned, and 25 percent say they would rather clean out their refrigerators.
To pick the right insurance policy, only 27 percent of respondents rely on a professional while most prefer anecdotal information from family, friends and Internet searches. Before buying insurance, 32 percent did not consult any source.
"At LearnVest, we want to make sure young adults in their 20s and 30s are making smart decisions about their money in order to build a solid financial foundation," says Alexa von Tobel, personal finance expert, CEO and founder of LearnVest.com. "Insurance plays an important role in financial security, and we need to help young people better understand their needs so they can protect themselves from unexpected curveballs."
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