Despite its numerous benefits, life insurance tends to be underutilized in financial planning. According to LIMRA research, nearly 85 percent of consumers agree that most people need life insurance, but Northwestern Mutual’s 2014 Planning & Progress Study indicates that only 23 percent and 24 percent of Americans own either permanent or term life insurance policies, respectively.
One possible reason for this coverage gap may be that Americans are not particularly comfortable discussing money or death — and life insurance sits squarely at the intersection of these topics. In fact, our research further revealed that Americans would rather talk about the birds and the bees than finances or death preparations. Misconceptions about costs are another factor that may influence insurance decision-making. LIMRA found that 83 percent of consumers do not purchase more life insurance because they think it is too expensive — because they believe life insurance costs nearly 3 times the actual price.
The silver lining to the current $15.3 trillion unmet insurance need is a significant opportunity for advisors to dispel myths and educate clients about how various types of insurance can serve as the pillars of strong, integrated financial planning strategy. At its core, the underlying message about insurance (i.e., “the need never goes away it just changes over time”) is universal and timeless.
However, in an age where the premium is squarely on personalization, converting skeptics into policyholders requires clearly connecting the dots between how insurance or lack thereof might directly impact your client’s personal financial goals. While every situation is unique, below are some considerations by generation that could be a good starting point for explaining the multiple other advantages of insurance aside from the death benefit.
Millennials: Roaring 20s
The largest and likely the most educated generation in history, Millennials are generally best known for their predilection for social media and technology. What may surprise some is that despite their love of all things new and forward, this group is decidedly “old school” when it comes to financial matters.
In our 2014 Planning & Progress Study, nearly two thirds of Millennials said they were “highly disciplined” or “disciplined” financial planners, more so than their parents and grandparents. Findings also showed Millennials to be cautious and concerned about “catching up” with regards to saving and planning for the future.
This precocious perspective on financial planning is a fertile ground for seeding the benefits of permanent life insurance. Risk-averse Millennials will find comfort in whim-proof, recession-proof growth while enjoying access to cash value* that offers the flexibility to pursue a range of financial goals — from paying down debt to funding a start-up.
Disability income insurance may also be worth discussing with this segment. Although young people tend to have a sense of invincibility, unexpected injuries or illnesses are impervious to age and could quickly derail financial and professional goals, creating a debt sinkhole that could last for years.
Gen X/Early Boomers: Mid-Life Mayhem
Americans in their 40s and 50s share a number of the same financial planning needs as those a decade or two behind them. But their list of concerns and assets is usually longer and more complex. Interestingly, our research revealed that respondents in this age bracket feel the least financially prepared and are most likely to identify themselves as “informal” or “non-planners,” even though the vast majority agrees that financial planning is important.