Who’s got the life?
Let’s take a moment to talk about life insurance—who has it and who needs it. Less than 3 in 5 Americans have any life insurance coverage at all. Although 84% of Americans would agree that most people need life insurance, only 70% said they themselves needed any (which is still more than the 59% that currently have any).
To break it down further, let’s look at life insurance coverage by generation:
Now, let’s look at it by gender:
- 56% have life insurance
- Average amount of individual life insurance: $129,800
- 62% have life insurance
- Average amount of individual life insurance: $187,100
Did you know? 51% of consumers would still prefer to meet with someone in person before making an insurance purchasing decision?
So, why aren’t they buying in?
Life insurance is a big deal, but most people don’t give it a second thought. In fact, 1/3 of Americans don’t buy life insurance because they don’t like to think about their demise. But that’s not the only reason.
Millennials, although the largest group, are the most underinsured generation when it comes to life insurance with only 33% of them possessing any coverage at all. One of the main reasons for this is because they overestimate the cost by 213%; on average, Americans without life insurance think the cost of it is three times more expensive than what it actually is.
In short, here are the main reasons people aren’t buying life insurance:
- They’re unsure of what and how much to get (38% of Americans suffer from this)
- They think it costs way more than it truly does
- They don’t like to think about death
So what can you do with this information? Let’s tackle each roadblock individually.
Problem: They’re unsure of what and how much to get
I just recently purchased life insurance for myself. I’m young, single, and, of course, I want to believe myself invincible. But, I’m not. And, after watching a close family member pass away this year, I realized how important life insurance truly is. It gives your loved ones peace of mind during a terrible time.
So, I sat down, and I did the calculations to realize, gosh, I really needed life insurance. What most young people my age don’t realize is that our student debt doesn’t just magically disappear when we pass. It goes somewhere. For me, it was my parents—my cosigners. That broke my heart. Not only would my parents have to grapple with the loss of their daughter, but they would also be stuck with all of her debt—a monthly reminder as they tried to pay off mine on top of their own.
That’s where I would start.
Propose the reality of the situation. With your clients, go through all of the debt they have and how much would be put on their loved ones when they passed. I guarantee you, you will have some surprised faces when you tell them some student debt can pass along (it depends on where it was borrowed from).
Take this into consideration. Credit.com found that 73% of Americans leave behind debt when they pass. The average debt per person in 2016 was $61,554. Almost 62K! Granted, that’s the national average for those with a mortgage, but the average debt for those without a mortgage still comes in at $12,875. A hefty chunk of change either way.
After breaking down the debt into categories, this is what they found:
- 68% left credit card debt averaging $4,531 per person
- 37% left a mortgage
- 25% left auto loans averaging $17,111
- 12% left personal loans averaging $14,793
- 6% left student loans averaging $25,391
The general rule of thumb for how much life insurance to purchase is 6-10 times your annual salary, but to me, that’s not helpful. That may provide far too little or way too much. For me, a single, childless 24-year-old renting and without a car payment, 6 times my salary would be way too much even with my stack of student loans; thus, the 10 would be as well. But for some, the 10x will be exactly what they’re looking for, it’ll just depend on the person.
It may sound silly, but many people don’t want to overpay now when it’s unnecessary. Budgets are tighter as cost of living and rent sky rockets. Because of this, many people are trying to watch their pennies and be smart about their spending decisions.
Another idea to point out to them and educate them about is how life insurance can be an investment in their own retirement. Not everyone will be interested, but it never hurts to show them how they could overpay now and be more comfortable later. Some will be attracted to this idea, others will shy away.
Whole Life vs. Term Life
Speaking of investment opportunities, it may be beneficial for your prospects and clients to know the differences between different types of life policies.
This is a tricky area and likely one most of clients and prospects would be confused about. I guarantee, the majority of the people you ask on the street wouldn’t know the difference. Use this as an opportunity to educate them.
Your job is made much easier when your clients are actively making decisions rather than staring at you with glazed-over eyes. If they’re aware of the differences, benefits, and downsides, they’ll be more apt to talk about their options and make a more informed decision. You aren’t there to decide for them—you’re there to guide them along to help them decide what is best.
To help make the process easier, try incorporating as many visuals as you can. Sixty-five percent of us are visual learners and could greatly benefit from pictographs over paragraphs.
Nerd Wallet has a great tool that you can use to better understand what your clients and prospects are wanting and, therefore, which policies would be best. Take a look:
Source: Nerd Wallet
The simple questions are straightforward and easy for your clients and prospects to answer. Do I or don’t I?
How they answer can help you get a read on what they want. Once the answers are chosen, options appear along the right side as to the policy best suited for that need. Here’s an example:
Source: Nerd Wallet
You can repurpose this sheet into a handout they can take home and consider their needs. Here’s an example of what your sheet could look like:
What type of life insurance is best for you?
|Pay off my debts
|Provide for my children
|Fund my funeral
|Leave an inheritance
|Invest extra money
Then, when they’ve indicated why they’re buying life insurance, you can write on the side which kinds of policies would be best suited for them. It’s rather high level, but it will help point them in the right direction, so they feel more comfortable when they’re making the decision. And, they will feel more connected to the decision itself, so it won’t feel like you’re choosing for them.
In addition, a simple sheet with a brief overview of the differences between term and whole life could be extremely beneficial. The definitions could be as simple as these from Nerd Wallet:
Term life insurance provides coverage for a certain time period. It’s often called “pure life insurance” because it’s designed only to protect your dependents in case you die prematurely. If you have a term policy and die within the term, your beneficiaries receive the payout. The policy has no other value.
You choose the term when you buy the policy. Common terms are 10, 20 or 30 years. With most policies, the payout, called the death benefit, and the cost, or premium, stay the same throughout the term.
Like all permanent life insurance policies, whole life provides lifelong coverage and includes an investment component known as the policy’s cash value. The cash value grows slowly, tax-deferred, meaning you won’t pay taxes on its gains while they’re accumulating.
You can borrow money against the account or surrender the policy for the cash. But if you don’t repay policy loans with interest, you’ll reduce your death benefit, and if you surrender the policy, you’ll no longer have coverage.
It doesn’t have to be anything fancy or elegantly designed. The goal is education and mutual understanding. Not all of your clients will care, but those that do will greatly appreciate you taking the time to create the handouts for them.
Help them understand their needed coverage by walking them through a needs assessment calculation.
Kiplinger’s Simple Solution is a perfect tool to quickly help your clients and prospects identify how much they’d need. It’s simple and can give them a rough estimate of how much coverage they’d truly need.
|Outstanding Student Loan Debt
|Outstanding Car Loan Debt
|Any Other Outstanding Burdensome Debt
Education Expenses For Children (optional)
$32,000/yr. (private), $9,500/yr. (in-state public), $24,000/yr. (out-of-state public)
Take one of these 3 numbers and multiply by 4 years and by the number of children you have
Replace 50% of what you currently make until retirement age)
|Estimated Life Insurance Need
If Kiplinger isn’t your favorite, you can always try these tools as well:
Problem: They think it costs way more than it really does
Although you and I both know life insurance is really affordable for most, many Americans just haven’t had the realization yet.
Many think that life insurance is going to be a drag on their monthly income. “How can I afford life insurance when I’m already paying so much for health insurance, car insurance and payment, mortgage/rent, groceries, utilities, and I have to have a life at some point!”
It’s important for you to point out, especially with your younger clients, how life insurance gets more expensive over time. So, one benefit they could find by buying-in now rather than later is that they could get a locked-in rate that’s far lower than a rate they’ll get if they wait. Showing them the value upfront will prove to go a lot further with your younger audience. Learn more about Millennials and insurance with in our free eBook Millennials & Insurance: How to sell to the most underinsured generation yet.
Bring out the charts. This will help prove to your clients and prospects the reality of the situation of how much life insurance actually costs a month. Get ready for that surprised look again. I had it when I first realized how inexpensive it was.
All I ask is one thing: please do not assume and compare it to coffee or avocado on toast purchases a month. Instead, ask something they splurge on on a weekly basis. Maybe it’s a movie or two a week, maybe they eat Panera every day for lunch, or maybe they can’t turn down a morning muffin from the local gas station. Whatever it is, let them tell you then make the comparison.
When you put the numbers into perspective, your clients and prospects are more likely to understand and see the value.
Problem: They don’t like to think about death
Well, no one really does, but we all die at some point. The game of life is not one where we get out alive, unfortunately.
One way to head this straight on is by turning the idea away from morbid thinking. Help them see they aren’t planning for their death, nor does buying insurance insinuate that they’ll be dying soon. It’s about preparedness and care more than anything.
Ask them about their family. Learn about their loved ones. That way you can turn the focus to how it will help take care of things for them, lessen their worry and stress, and ensure that they are taken care of.
It will help take the perspective off of the morbidity of the situation and change it to a business transaction of love. We all want to leave a legacy; help them create a positive legacy for them to leave behind.
Growing & Managing Your Life Book of Business
You may be saying, well this is all fine and dandy but where are all these leads coming from? Like I said earlier, only 59% of Americans have any life insurance coverage at all. On top of that, a third of those only have a basic group policy—likely one sponsored by their employer. So the potential leads are quite vast.
The first (and best!) place to look for these people? In your own book of business. The probability of selling to an existing customer is at least 40% higher than trying to close a deal with a brand new lead.
However, this can be difficult and definitely time-consuming if you have to manually comb through every client you have to see who’s missing life insurance with you. An industry-specific agency management system (AMS) like AgencyBloc will drastically reduce the time and energy you spend identifying cross-sell opportunities.
How? All you have to do is run a simple cross-sell report that identifies all the clients in your book that don’t have life insurance coverage with you.
The best part? This takes less than 30 seconds.
Does it actually work? You betcha. In fact, one of our clients noted that their top two brokers were each able to grow their life books of business by 20% just by using the cross-sell report in AgencyBloc. 20%! Just think of how much revenue that could bring in for your insurance agency.
So, what are you waiting for? Let’s raise that number from less than 3 in 5 people to exactly 5 in 5!
[eBook] 7 Life Insurance Marketing & Selling Tips
Close the gap of those without life insurance coverage with the tips to help you get more exposed to your audience and sell more policies.