Life insurance serves as a critical component for financial protection, and yet more than 100 million Americans do not own life insurance of any kind.
According to a 2015 study published by LIMRA and Life Happens, 20 percent of Americans are solely covered by employer-sponsored group life insurance, 25 percent solely through individual coverage, and 15 percent are covered by both.
What motivates the 60 percent of Americans that do have life insurance? Those who obtain coverage for life protection do so for mainly traditional reasons. Life insurance alleviates worry about leaving dependents in financial hardship, it provides financial security for loved ones, and alleviates the burden of final expenses.
Nearly 85 percent of Americans believe that life insurance is of critical importance. More than half of American households would feel the loss of a primary wage earner with a year. And 30 percent of those who own life insurance believe they do not own enough.
What’s standing between consumer concept and actual ownership?
Barriers to Ownership
The top two reasons why U.S. consumers aren’t interested in purchasing life insurance are: the product’s high perceived cost, and their other, more pressing financial priorities.
Figure 1. Reasons for non-ownership. Adapted from 2015 Insurance Barometer.
The specific financial priorities competing with life insurance for all age groups are cost of living expenses like a mortgage, or groceries; additional living expenses, such as internet or cell phone bills; and dealing with credit card debt. Ages 25 to 65+ cite saving for retirement as a major concern. Those in the 44 and below age groups are specifically interested in building a savings account or emergency fund. Those in the 25 and below age group are most focused on recreational activities like the movies, eating out, and shopping; saving/paying for a new car or second home; and paying of college loans.
While the perceived high cost of life insurance is the number one reason not to purchase, the study found a vast discrepancy between reality and perception.
For example, 8 out of 10 Americans will overrate the price for a 20-year, $250,000 level-term policy according to the study. The scenario presented to respondents is a non-smoking 30-year-old consumer, and the correct rate was $160 annually. The median estimated yearly cost given by all consumer age demographics was $400, and 1 in 4 on average estimated the cost to be at least $1,000 a year.
Consumers are mostly unaware of the factors that affect product pricing. They understand how factors like smoking, medical history, or heavy alcohol use, as well as age, can factor into pricing. However, many don’t understand other factors such as gender or occupation can influence pricing as well.
Changing perception is a key tactic for future efforts. Reaching out and educating consumers, or having content readily available and easily understandable for them to browse might be the solution to change perceptions about price, trustworthiness, and the benefits of the product.
Contact your Sales Representative to discuss the best strategy for life insurance products from CoPower today.