Top 3 Reasons People Buy and Don't Buy Life Insurance

Life insurance is one of the most versatile financial products available. It is customizable, can serve any market, and is affordable even for those with smaller budgets. Most consumers use life insurance to protect against life’s worst moments but life coverage can also be utilized to build a legacy for future generations. 

There are specially designed life products like Indexed Universal Life policies that are made to accumulate cash value that can be used for tax free income when you reach retirement age. An Annuity is a life insurance product that you can move funds from a 401k or IRA into for protection. Annuities were designed to protect your retirement assets from market fluctuations.

With so many different types of insurance you would think most families own some type of coverage. You may be surprised to discover that barely half, 52%, of the population in the US own life insurance (LIMRA 2021).  There are many socioeconomic factors that help paint the picture of the lack of urgency of American consumers to purchase life coverage. In a 2021 survey study, LIMRA (Life Insurance Marketing and Research Association) discovered the most popular reasons consumers give on why they choose to buy or not buy life insurance. 

Top Reasons Consumers Buy Life Insurance

• Cover burial and final expense (83%) - You should not be surprised that this is the most popular answer. After all there is a specific type of life insurance designed to solve this problem. Between funeral costs and potential hospital stays, a loved one's last days can become a large bill very quickly. The average funeral costs in the US costs around $8000 to $10000. 
• Help replace lost wages/income of a wage earner (68% -  If you lost 35-50% of your total household income how long would it take before you were in trouble financially? For most of us the answer to that question is “not long”. A life insurance policy may not be able to completely make up for loss of income, it can certainly provide a cushion to ease the immediate financial burden following the death of a breadwinner.
• Transfer wealth or leave an inheritance (63%) - As an advisor, I get this one a lot. Almost every client I speak with has an interest in leaving something behind for their children or grandchildren. Life insurance makes this process very efficient because the proceeds from the policy are delivered tax free to the beneficiaries within a few days of filing the claim. 

Top Reasons Consumers Don’t Buy Life Insurance

• It is too expensive (60%) -  Although most buyers overestimate the cost of life insurance, premiums can certainly increase if the client is older, is in poor health, or is a smoker. Younger and healthier clients get much better rates because they are less likely to die in the near future and are considered less risky.
• Have other financial priorities (55%). - This is an interesting but predictable response. Clients will often put buying life insurance on the back burner of priorities because they feel like they “have time” and will worry about life insurance later. The problem with that thought process is that one diagnosis or tragic life event can severely limit a client’s options for coverage. Then when they need insurance the most, they have to buy what they can, instead of what they need. 
• Unsure how much and what type (53%) - Researching life insurance on your own is a daunting task. It does not take very long before analysis paralysis sets in. We always suggest reaching out to an advisor you trust if for no other reason, to give you different options to research. A good advisor will help you understand your financial position and make recommendations based on your goals.

If you are reading this, chances are you fall into the latter category and may not have purchased a policy yet. Don’t wait. Reach out to an advisor to get the information you need, get answers to the questions you have, and make the right decision for your family.  At Blaeos Life we have many tools and resources available to help you get the information you need to make the right choice for your family.

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