Imagine this scenario: You know you need to get in better shape, so you decide to join a gym for the first time. You walk in the door and look out at a huge room with a vast array of machines, equipment and objects — and have absolutely no idea what any of it’s for or how it works. No one greets you or offers to show you how to use the apparatus, much less asks you about your particular interests or special needs. You notice a few other people who seem to be working out, but frankly, they don’t look much like you, so you doubt you have much in common.
A lot of us would turn around and walk out the door at that point, never to return. And unfortunately, that’s the experience most Americans have with life insurance. They know they need it, but they don’t know what kind or how much, no one is talking to them about it, and they don’t even know what questions, or who, to ask.
The key is you don’t sell life insurance. You communicate it.
A nation at risk
Americans remain dramatically uninsured – and underinsured – for life insurance. In fact, life insurance ownership is at an all-time low. A startling 41 percent of U.S. adults have no life insurance at all, according to recent LIMRA data, and 43 percent of those who have coverage admit it’s not enough. Both men and women are less likely to own life insurance today than they were in 2004.
The odds of not having life insurance have increased dramatically for every age group since that time, and only 1 in 10 insured adults owns both permanent and term life insurance — half as many as in 2004.
This creates a nation of families who could be on the brink of financial ruin if a primary wage-earner dies. For example, of the households that own life insurance, 7 in 10 have only enough to replace their household income for 3.5 years.
The general rule of thumb is to carry enough life insurance to replace income for seven to 10 years. For those fortunate enough to have employer-provided life insurance, many assume the relatively small amount of coverage it offers will be adequate for their needs, when, in reality, it often will pay for little more than final expenses.
Tally up the ongoing costs of mortgage payments, utilities, food, transportation, health care, clothing and all the daily necessities of life — not to mention longer-term expenses such as children’s college education —a nd you’ll quickly see the gap in coverage.
Those without life protection are obviously at even greater risk, especially since 61% of American workers live paycheck to paycheck, and 34% of households admit they would immediately have trouble meeting everyday living expenses if a primary wage earner died today.
Why don’t they buy?
Consumers are likely to delay the purchase of additional insurance because they have other financial priorities right now or feel they can’t afford it. High unemployment, reduced household income and increases in daily living expenses have caused many people to postpone their financial decisions.
They’re not sure how to fit insurance premiums into their budgets on top of other priorities demanding their attention, a frighteningly short-sighted viewpoint.
But one of the main reasons people don’t buy life insurance is lack of knowledge. Many people put off buying life insurance because they simply lack the knowledge to make an informed purchasing decision.
They don’t understand what type of coverage to buy or how much they need. And when consumers don’t understand their choices — especially the type of coverage they need for their own personal situations — they’re not likely to buy. In fact, of those who say they need life insurance, 44% say they haven’t bought any because they don’t know how much they need. And employers agree: only 41% of employers in a recent survey said their employees understand the need for life insurance coverage very well.
Life insurance isn’t bought, it’s communicated