Learn how to help your clients overcome common life insurance roadblocks effectively.

As a life insurance agent, you know the value and peace of mind that life insurance can bring to your clients and their loved ones. The right policy can provide the financial security your clients want their loved ones to have when they pass. However, with only 52% of Americans having life insurance, it’s clear that many people either aren’t aware of its benefits or are misled by common myths and misconceptions. 

Read on as we discuss ways you can effectively communicate the value of life insurance to your clients. 

Why Aren’t People Buying Life Insurance? 

The biggest roadblock between someone purchasing life insurance usually boils down to a lack of knowledge. LIMRA’s 2021 Life Insurance Barometer Study has identified four of the most popular misconceptions Americans have about life insurance: 

  1. Life insurance is too expensive 
  2. My employer-provided coverage is sufficient 
  3. It’s too difficult to purchase life insurance 
  4. Life insurance isn’t necessary until you’re older

In addition, nearly 38% of Millennials, 19% of Gen Xers, and 16% of Boomers believe that they won’t qualify for life insurance, which leads them to pass on looking into it, let alone buying it. 

Whether it be due to a lack of knowledge or they’re simply unsure of where to start, you play a critical role in helping your clients see the value life insurance has to offer. 

So, Why Do People Purchase Life Insurance? 

Life insurance offers many benefits to both policyholders and their beneficiaries. While there are different types of life insurance policies that have different stipulations, the three main reasons people buy life insurance include: 

  • Income replacement. Life insurance can replace your income if you die, enabling those who are financially dependent on you to be taken care of in your absence. 
  • Final expense payment. Your policy can cover the costs of your funeral, debts (such as student loans, car loans, mortgages, etc.), outstanding medical bills, and other expenses. 
  • Transferring wealth. The beneficiaries named on your life insurance policy will receive the death benefit, allowing you to transfer wealth across generations. 

While these key benefits are great to highlight, your clients may have a particular roadblock that’s stopping them from buying a policy. 

Help Your Clients Overcome Common Life Insurance Roadblocks 

As an insurance agent, it’s your job to not only advise your clients on the best policy to choose but also show them the value of being properly insured. In order to do so effectively, you need to understand why your clients may hesitate to purchase life insurance. 

Some may be uncertain about what type of coverage to get. Others may think their coverage is sufficient when in reality, it isn’t — in fact, 50% of Americans are actually underinsured. 

Roadblock #1: They Believe That Life Insurance Is Too Expensive

More than half of Americans think life insurance is three times more expensive than it actually is. Millennials, in particular, overestimate the cost of life insurance by more than six times its actual cost. This misperception, sadly, causes most people to not even bother looking into their options. 

For example, in LIMRA’s 2020 study a group of Millennials was asked what they thought the average cost of a $250,000 term life policy for a 30-year-old man (who does not smoke and has no health problems) would be. They responded as such:

  • 44% of Millennials thought that the policy was likely to cost more than $1,000 a year
  • 17% of Millennials thought that the policy was likely to cost anywhere from $500 to $1,000
  • 13% of Millennials thought that the policy was likely to cost anywhere from $300 to $500

On the contrary, the average cost is about $160 (quoted for the individual who qualified for the preferred plus risk class).

There is an opportunity here, however, to use this misperception to your advantage. Leverage online comparison tools to show your clients what the actual cost of their policy would be compared to what they fear it would be — they might just be pleasantly surprised.

Roadblock #2: They Have Other Financial Priorities

Between saving, paying off debt, and health, living, and recreational costs, life can be expensive, and people need to budget their money according to their priorities. Other significant financial responsibilities are a big contributing factor as to why many haven’t purchased coverage. 

The best way to overcome this roadblock: Present the value of life insurance upfront and encourage them to think of it as an investment rather than an expense. Show your clients the differences in policy costs now compared to getting them at a later time and how those costs can fluctuate as their health, situation, and life change. Let them know that the sooner they purchase a policy, the better. In fact, 40% of people say they wish they had purchased life insurance policies at a younger age since they can typically get lower premiums. 

Be sure to let them know that while it is a monthly payment, it’s usually less expensive than they imagine, and the long-term benefits can vastly outweigh the immediate costs. 

Roadblock #3: Uncertainty About How Much or What Type to Buy

With the many different types of life insurance out there, people find themselves unsure of what type to buy or how much coverage they need, which can cause them to avoid making a decision altogether. In fact, about 58% of Millennials, 39% of Gen Xers, and 29% of Boomers say that they don’t know what kind of life insurance policy they should purchase or how much coverage they need.

Overcome this roadblock by pointing out what expenses life insurance can cover and how much they typically cost. 

When it comes to how much coverage they should get, a good guideline is about seven to 10 times your annual salary. In 2019, the median wage was $19.33 per hour, which equates to roughly $40,000 a year. Using this model as an example, the average person should get between $280,000 and $400,000 in life insurance. 

Typical expenses life insurance can cover include:

  • Funeral costs, which average at $7,640 
  • Credit card debt comes in at an average of $6,194
  • Mortgages rang in at $202,284 for an average
  • Car debt averages at about $19,646
  • Student loan debt came in at a whopping $32,731 on average (which is critical to consider since not all student loans are forgivable)

This is by no means a complete and comprehensive list, nor will every client fall into the average — they may be above or below. However, these numbers give a quick overview of the possible expenses that they may need to consider when looking into how much coverage to purchase. 

You should also let your clients know that along with the amount of coverage they purchase, the type they get also matters. Life insurance can be an investment opportunity, and the kind of policy they get can make a big difference, which most people aren’t aware of. When it comes to what type to buy, discuss the following with your clients:

What type of life insurance is best for you?
Pay off my debts Yes No
Provide for my children Yes No
Fund my funeral Yes No
Leave an inheritance Yes No
Invest extra money Yes No

Then, work together to see what types of policies they need and how much they’ll want to take out for each. As the insurance agent, you’ll be able to expertly guide them to the right type and amount of coverage. 

Roadblock #4: People Don’t Like Thinking About Death

It’s quite common for people to avoid thinking about death and anything associated with it. Life insurance is designed to help people have peace of mind that their loved ones will be taken care of when they pass away. 

One way to deal with this roadblock is to shift the focus of the conversation from death to the legacy they’d like to leave behind. Emphasize the peace of mind your clients will experience knowing their loved ones will be taken care of. Explain to your clients that life insurance is a way they can relieve their loved one’s financial stresses and allow them the space they need to grieve without worrying about money. After all, life insurance is about preparedness and care for your loved ones more than anything. 

Roadblock #5: They Believe Their Employer-Provided Coverage is Sufficient

While a little over half of Americans have life insurance, 30 million American households are actually underinsured. This means that the majority of American families will struggle financially after the death of their policyholders.

It’s common for employer-sponsored life insurance to be little to no cost, which can cause your clients to neglect looking into whether they’re sufficiently covered. The U.S. Bureau of Labor Statistics has found that the median life insurance coverage offered by employers is equivalent to either one year’s salary or a flat sum of $20,000, which can create financial hardship for families in the future, especially for dual income households. 

Show your clients the facts: 42% of families may have monetary troubles within six months, and 25% of families may struggle financially within a month. While having coverage that’s seven to 10 times your salary is a good guideline, this will vary between individuals. Encourage your clients to set up a meeting to ensure that they have adequate coverage. 

Use an Agency Management System to Better Serve Your Clients 

With almost half of Americans lacking life insurance coverage and 27% of people only having group coverage (which is usually insufficient and rarely portable), there are likely many leads in your current book of business you could cross-sell. 

Manually looking through every client you have to see gaps in their coverage is a time-consuming task. Use the power of technology to streamline the process and save valuable time, money, and energy. 

An industry-specific agency management system (AMS) like AgencyBloc enables you to access key information about your clients, identify cross-selling opportunities, and act on them efficiently and effectively. In our software, you can run a simple pre-built cross-sell report or build your own custom reports to identify all of your candidates in just minutes.

Cross-Sell Report in AgencyBloc

Source | AgencyBloc

After that, contact our clients using our Automated Email and Marketing Campaign tools to continue growing your book of business and serve your clients better than ever before. 

Schedule a demo today to see how AgencyBloc can help grow your business.

An organized book of business is critical to growing your business. Learn more about how AgencyBloc's industry-specific tools can help you close the life insurance gap in your client base and support your agency’s success. Read the performance brief.

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This blog was originally published on November 8, 2017. It was updated and republished on November 17, 2020, and again on October 26, 2021.

Posted by Allison Babberl on Tuesday, October 26, 2021 in Automated Lead Routing & Assignment

  1. client retention
  2. data management
  3. quoting
  4. selling

About The Author

Allison Babberl

Allison is the Content Lead at AgencyBloc. She manages the creation and schedule of all educational content for our BlocTalk and Member communities. Favorite quote: “Conversation is the bedrock of relationships. Without it, our relationships are devoid of substance.” -Maribeth Ku ... read more