Americans overestimate the price of life insurance by nearly three times the actual cost -- and young adults overestimate the price by nearly seven times the actual cost.

Those are two of the findings from two surveys conducted by LIMRA, an industry group. One survey considered consumer perceptions of life insurance while the other, conducted in conjunction with the nonprofit LIFE Foundation, reviewed consumer knowledge of life insurance rates.

Consumers overestimate price of life insurance

A survey conducted by LIMRA and the LIFE Foundation found many consumers have little understanding of life insurance rates. When asked to estimate the annual premium for a 20-year, $250,000 term life policy for a healthy 30-year-old, the average response was nearly three times the actual cost.

According to LIMRA, premiums for this policy would average $150 annually. However, the average estimate from survey respondents was $400. Young adults overestimated by seven times the actual price, even though policies for their age bracket generally have the lowest cost.

In a statement accompanying the survey results, LIMRA and the LIFE Foundation urged consumers to act quickly to find life insurance coverage. While 83 percent of consumers cite price as the main reason they have not purchased coverage, these individuals may be surprised at the life insurance quotes they receive.

Marvin Feldman, president and CEO of the LIFE Foundation, notes in a press statement that the cost of basic term life insurance has dropped by about 50 percent in the last 10 years.

Life insurance industry valued by consumers

Another LIMRA survey found those who have personal experience with life insurance tend to look upon it more favorably than people who haven't purchased coverage. In a recent survey, a majority of these respondents agreed with the following statements about the life insurance industry:

  • Plays a critical role following the death of a loved one: 80 percent
  • Offers products that give people peace of mind: 76 percent
  • Offers quality products people need: 66 percent
  • Helps people be financially responsible: 54 percent

The percentage agreeing with these statements was lower for those who did not have personal experience with life insurance. Still, a majority of those without life insurance experience agreed the industry plays a critical role following a death, and that it offers products that give people peace of mind.