The Importance of Life Insurance for LGBTQ+ Families

Life insurance provides critical financial protection for clients, but planning for the loss of a loved one can be a sensitive topic for many individuals. This can be especially true for the LGBTQ+ community with 62% reporting they’ve faced financial challenges because of their gender identity and/or sexual orientation.¹ Despite progress towards equality, discrimination remains a reality for LGBTQ+ individuals. According to LIMRA, only 38% of the LGBTQ+ population have life insurance.² This gives you an opportunity to be a valuable resource for clients in preparing for their family’s future. Explore best practices and guidelines for approaching the sensitive nature of life insurance and special considerations for LGBTQ+ clients.

LGBTQ+ family statistics

The LGBTQ+ community in the U.S. represents approximately 18 million consumers³ and continues to grow. The 2019 U.S Census found that 15% of LGBTQ+ couples had at least one child under 18 in their household.

When working with LGBTQ+ parents, it’s important to understand their pathways to parenting often take shape in many different ways, including adoption, surrogacy, fostering, or children from a past relationship. These unique paths are all the more reason to help ensure their families are protected. Consider these financial planning stats:

• Same-sex couples are four times more likely to adopt children or have stepchildren.⁴
• Domestic adoptions can cost as much as $40,000, while international adoptions can exceed $50,000.⁵
• Surrogacy expenses can range from $60,000 to $150,000.⁶
• Raising a child from birth to 18 years requires more than $230,000.⁷

A study conducted by LIMRA found that for LGBTQ+ families, if the primary wage earner in the family passed away, 45% of those making financial decisions acknowledged their families would struggle financially within six months, while 30% felt they would face hardships in just three months.⁸

Life insurance policy ownership is low for LGBTQ+ adults

As mentioned, only 38% of LGBTQ+ households have life insurance, this is compared to 44% of the general population. Keep in mind, it was only in June 2020 that the U.S. Supreme Court confirmed that federal protection against workplace discrimination applies to all LGBTQ+ individuals under the Civil Rights Act of 1964.⁹ Although discrimination affecting LGBTQ+ people, and its impacts, is hard to map and quantify, workplace discrimination often means LGBTQ+ clients have inconsistent employment histories and limited opportunities for professional advancement and benefits coverage.

Another financial consideration is that many LGBTQ+ individuals have formed communities primarily in places most welcoming to them. These areas are most commonly large metropolitan cities where non-discrimination ordinances offer protections around housing, employment, and essential services. Maintaining primary residences in large cities comes with higher costs of living, creating competing priorities when it comes to considerations around life insurance.

Life insurance misconceptions

In the survey conducted by LIMRA, the reasons given by the LGBTQ+ respondents for not buying life insurance stems from the perception it is too expensive and that it competes with other financial priorities.

This aligns with misperceptions from the general population, with more than half of Americans overestimating the cost of life insurance by as much as threefold. This is especially true for younger generations. 44% of millennials estimate the cost of term life insurance for a healthy 30-year-old to be more than six times higher than it actually is.¹⁰ This misperception about cost, coupled with prioritizing other financial needs, puts families needlessly at risk of financial hardship.

As always, every client has unique financial priorities. That’s why it’s important to be transparent about cost and explain that life insurance is an investment, not just an expense. Nationwide offers valuable tools for financial professionals to use with clients that provide a comprehensive look at the features and potential benefits of Nationwide life insurance products before they buy.

Benefits of life insurance for LGBTQ+ families

If a tragedy takes place, life insurance can offer clients some reassurance that the people they love will be taken care of. This includes:

• Protects day-to-day family expenses: Life insurance can help make sure daily expense of housing, food, childcare and other living expenses are covered.
• Eases the burden of debts: Prevents leaving family members with the burden of a mortgage, medical costs, car, or other debts.
• Protects the future for loved ones: Allows family members to plan for long-term goals like those around education or retirement.

How LGBTQ+ families can use life insurance

When working with clients, providing common and practical uses for their family can help them understand the importance of prioritizing life insurance. Here are 5 ways LGBTQ+ families can use life insurance:

1. Mortgage protection – Term life insurance can be used to pay off an outstanding mortgage balance, allowing the family to stay in the home.
2. Income replacement –Term life insurance can be used to replace the lost income so the survivor can maintain the same standard of living.
3. Final expenses –Funeral expenses, burial costs and medical bills can add up. Permanent life insurance is available in various amounts, so clients can pick a death benefit that meets their needs.
4. College funding –Term or permanent life insurance can help fund a college education. This advance planning can help provide clients peace of mind with the rising costs of higher education. Tuition costs can add on average $20,000 per year for a 4-year degree from a public university¹¹ and private college tuition is often more than double the annual bill of public colleges.
5. Pay off debts, estate tax, or inheritance tax –Having a life insurance policy can help provide relief to any estate tax or inheritance tax for loved ones to receive what was left.
6. Long-term care insurance – Long-term insurance care insurance coverage can help cover costs around home health care, nursing homes, necessary home modifications and other qualifying services. This coverage can be a great way to plan for a cost-effective and flexible solution that helps LGBTQ+ seniors maintain choice and control of care options. Learn more about the importance of planning.

How to keep conversations about life insurance inclusive

While LGBTQ+ clients have similar needs for long-term financial security, taking time to understand the challenges and opportunities these clients face can help you develop unique approaches for their financial plans and build long-term, trustworthy relationships. One example to keep in mind, the process of life insurance may be a higher source of stress for transgender or non-binary clients. Help these clients feel empowered by preparing them for the questions and records that may be requested, and offering support and communication throughout the process.

To learn more about navigating LGBTQ+ representation and their experiences, basic allyship tips and more, view our webinar with One Iowa.

LGBTQ+ 101 Webinar

In building relationships, keep in mind 76% of LGBTQ+ consumers agree that the brands they tend to buy from are openly supportive of the LGBTQ+ community.¹² From prioritizing diversity, equity and inclusion training, to sponsoring events and using inclusive language, there is an expectation from consumers that companies, like Nationwide, demonstrate their commitment to wellbeing and safety of the LGBTQ+ community.

Read Nationwide’s diversity, equity, and inclusion philosophy.