That's according to new figures from Hargreaves Lansdown, which show this group of adults prefers to rely on emergency funds kept in a savings account.
But is a rainy day stash enough of a financial safety net for loved ones should the worst happen? Which? takes a closer look at the latest statistics to find out.
Gap in protection for under-50s
Life insurance works by giving your loved ones a lump sum when you die and is intended to pay for debts, such as a mortgage or loans, university fees and general living expenses. But research by Hargreaves Lansdown found that cover taken out by younger policyholders often falls short.
The investment firm's Savings & Resilience Barometer measured emergency savings, assets and insurance against factors such as debt and the cost of looking after children to calculate whether people have sufficient life cover. The analysis showed a worrying number of people under 50 years old do not have enough life insurance to meet all the necessary costs.
Only 30% of those aged 30 to 34 have enough, rising slightly to 35% for those aged 35-39. While less than half of adults in their 40s have taken out the right protection, 43% of those in their early 40s, and 47% of those in their late 40s. The shortfalls are even more worrying among couples with children – only 26% of whom have enough life cover.
The findings also showed that just 35% of people with a mortgage are covered for all expenses.
Sarah Coles, Hargreaves Lansdown's head of personal finance, believes these figures are most likely down to people choosing to only cover mortgages and forgetting the other significant expenses family members may face after you've gone.
'We need to consider exactly what help our family would need if something was to happen to us,' she says. 'It’s absolutely essential not to overlook life insurance in the overall picture. If the worst came to the worst, your family would be lost without you in so many ways, but insurance ensures that their finances would survive.'
Find out more:How much life insurance cover do you need?
First consider your debts, including mortgage, loans and credit cards.
Then think about other general expenses, such as utility bills and groceries. Don't forget other major costs that your family might need help with if you're gone – for those with children, for example, these could include school or university tuition fees, holidays, and extracurricular activities such as music lessons.
Everyone's circumstances are different, so you'll need to tailor the cover to fit your individual needs.
Depending on your situation, you might want to have more than one life insurance policy. For example, you might get a decreasing term policy to help your loved ones pay off a mortgage, and an increasing term policy to leave a lump sum for them to cope with other costs.
Once your policy is set up, make sure you review it regularly, especially if your life changes in any way – whether that's having another child or buying a new home. It’s normally fairly easy to amend your policy, but talk to your insurance provider to find out more.
Find out more:Are savings a good alternative?
People in their mid-life may not be taking out enough life insurance cover, but they are doing well at saving for an emergency. Hargreaves Lansdown's data shows around two thirds of people in their mid-30s to mid-50s have at least three months’ worth of essential expenses in savings.
It's easy to see why people may choose savings accounts as a way to protect their family's future. Interest for many types of savings accounts is still higher than 5% AER, meaning your nest egg is growing faster than the current rate of inflation. Most savings accounts, once open, also give you the freedom to deposit however much money you wish and whenever is convenient for you.
Life insurance, on the other hand, requires you to make set monthly or annual payments. Failing to keep up with that commitment could result in the entire policy being cancelled and losing all coverage.
However, even if you have an instant-access account with no restrictions on withdrawals, once you die the account will be frozen and it's illegal for family members to take any money out. The bank is only allowed to release the funds to the executor of the will after it receives an Order of Probate granted by the courts. It can sometimes take up to 12 months to settle an estate.
Life insurers, on the other hand, can settle claims within a month or even days if there are no complications and all necessary documentation is in order.
Unlike interest earned on non-Isa savings accounts, life insurance payments are tax-free. Payments can also be set up to go into trust, so your family receives the money sooner. This also means the payment does not form part of your estate so is not subject to inheritance tax (IHT).
Find out more:Which? Limited is registered in England and Wales to 2 Marylebone Road, London NW1 4DF, company number 00677665 and is an Introducer Appointed Representative of the following: 1. Inspop.com Ltd for the introduction of non-investment motor, home, travel, pet, van and temporary insurance products (FRN 610689). Inspop.com Ltd is authorised and regulated by the Financial Conduct Authority (FCA) to provide advice and arrange non-investment motor, home, travel and pet insurance products (FRN310635) and is registered in England and Wales to Greyfriars House, Greyfriars Road, Cardiff, South Wales, CF10 3AL, company number 03857130. Confused.com is a trading name of Inspop.com Ltd. 2. LifeSearch Partners Limited (FRN 656479), for the introduction of Pure Protection Contracts, who are authorised and regulated by the FCA to provide advice and arrange Pure Protection Contracts. LifeSearch Partners Ltd is registered in England and Wales to 3000a Parkway, Whiteley, Hampshire, PO15 7FX, company number 03412386. 3.Which? are an Introducer Appointer Representative of Optimise Media Limited (FRN 313408), for the introduction of HSBC Group, who are authorised and regulated by the Financial Conduct Authority to provide credit brokering activity. Optimise Media is registered in England and Wales to Exchange Street Buildings, 35-37 Exchange Street, Norwich, England, NR2 1DP and company number 04455319. We do not make, nor do we seek to make, any recommendations on financial products or services that are regulated by the FCA, as we’re not regulated or authorised by the FCA to advise you in this way. In some cases, however, we have included links to regulated brands or providers with whom we have a commercial relationship and, if you choose to, you can buy a product from our commercial partners. If you go ahead and buy a product using our link, we will receive a commission to help fund our not-for-profit mission and our campaigns work as a champion for the UK consumer.
source https://www.which.co.uk/news/article/two-thirds-of-adults-in-their-30s-dont-have-enough-life-insurance-aveY96v8Fkof