Who’s got the life?
Let’s take a moment to talk about life insurance—who has it and who needs it.
- Fewer than 3 in 5 Americans have any life insurance coverage at all.
- Only 30% of Americans have sufficient life insurance coverage, and nearly 40% of those who don’t are without because they don’t qualify.
- California sells the most life insurance coverage coming in at 452.38 Billion, and Wyoming is last with 5.1 Billion in sales.
In addition to life insurance coverage, only 16% of Americans have disability insurance. Granted, the overall numbers could be slightly lower at the present moment due to COVID-19 and the hit the workforce took in general. So, these numbers could increase according to Life Happens.
So, why aren’t they buying life insurance?
Life Happens shared these top 6 reasons from the 2020 LIMRA Insurance Barometer Study for why people don’t buy life insurance:
- Have other financial priorities
- It’s too expensive
- Don’t feel I need any
- Unsure of how much/what type to buy
- Haven’t gotten around to it
- Don’t like thinking about death
In addition, No Exam found that nearly 38% of Millennials, 19% of Gen Xers, and 16% of Boomers believe that they are unlikely to qualify for a life insurance policy.
So, what can you do with this information?
Roadblock: Have Other Financial Priorities
Sixty-one percent of people said they have significant financial responsibilities, which prevent them from buying life insurance coverage. These other expenses include:
- Living expenses (rent, mortgage, utilities, groceries, etc.)
- Additional living expenses (cable, phone, internet, etc.)
- Debt repayments (credit cards and personal loans)
- Health expenses
- Recreational expenses (movies, eating out, shopping, vacations, etc.)
No Exam reported that both Gen Xers and Millennials tend to prioritize savings and debt management over life insurance.
To counteract the reasons why they don’t, Life Happens also shared the top 5 reasons why people do purchase life insurance:
- Paying for one’s burial costs and final expenses
- Transfer of wealth across generations
- Replace lost wages/income
- Supplementing retirement income
- Pay off the mortgage
The key way to overcome this roadblock is to present the value upfront. Yes, it is a monthly cost, but it usually doesn’t cost what they imagine it will, and the long-term benefits can vastly outweigh the immediate costs.
Note the difference in cost now vs. later and how those changes can affect the person as their health, situation, and life changes. Life Happens reported that 40% of people who own life insurance wish they had purchased policies at a younger age.
Being a bit more uncomfortable now, and getting yourself set up for the future could prove beneficial in the long run. It’s at least worth having the conversation with your clients.
Roadblock: It’s too expensive
Research shows that 65% of Americans without life insurance think coverage will be too expensive. In general, about 4 out of 5 Americans overestimate the cost of life insurance premiums, with the largest group of overestimators being Millennials.
The LIMRA study asked a group of Millennials 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). 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.
The truth is that the average cost is about $160 (quoted for the individual who qualified for the preferred plus risk class).
Use this to your advantage and leverage online comparison tools to help them see what the actual cost is vs. what they fear. It might just turn out to be a happy surprise for them.
Roadblock: Unsure of How Much/What Type to Buy
The average death benefit for life insurance policies issued to Americans in 2018 was $168,000.
When it comes to how much, the general rule of thumb is 7-10 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, that average person would purchase between $280,000 and $400,000 in life insurance.
The other averages for expenses include:
This is by no means a complete and comprehensive list, nor will every client be the average. They may be below or above in all of the categories. However, it gives a quick overview of the average standing as of 2019 for some of the big-ticket items.
It will also depend on which of their debt is forgivable and what is not. Not all student loans are forgivable, and that’s a crucial point to take into consideration.
Another avenue they may not be aware of is that life insurance can be an investment opportunity. The type you buy can make the difference, and I guarantee the vast majority of your clients won’t know that at the start.
Ask them the following questions:
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, work together to see what types of policies they need and how much they’ll want to take out for each.
Roadblock: Don’t Like Thinking About Death
Well, no one 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 focus on how it will help take care of things for them, lessen their stress, and give them the space to grieve and not worry about finances.
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 behind a legacy; help them create a positive legacy.
Identifying The Clients Without Life Insurance
Like I said earlier, only 57% of Americans have any life insurance coverage. Out of those who do, 27% (1 in 3) only have group coverage, which is usually insufficient and rarely portable.
For you, this means there are potentially many, many leads in your current book of business you could cross-sell.
This can be difficult and 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.
Source | AgencyBloc
Run a simple pre-built cross-sell report in AgencyBloc and identify all of your candidates in just minutes.
After that, keep growing your book of businesses and ensuring your clients are well-taken care of today, tomorrow, and at the end of their life.
Want to learn more about managing life insurance in AgencyBloc?
Having an organized book of business is key to being able to identify life insurance opportunities. Learn more about how AgencyBloc's industry-specific tools can help you close the life insurance gap in your client-base while continuing to grow your book of business.
This blog was originally published on November 8, 2017. It has been updated and republished on November 17, 2020.