Why Don’t People Purchase Life Insurance?

Life insurance can be one of the best purchases a person makes because it provides financial security that other investments can’t offer. Despite this, many people remain underinsured or simply put off purchasing life insurance at all.

Financial professionals who want to grow their businesses need to target these underinsured individuals to understand what prevents this market from buying insurance. If financial professionals understand why consumers don’t purchase insurance in the first place they can overcome client objections and increase sales.

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Why people should purchase life insurance

The benefits of life insurance are relatively straightforward, and the death benefits life insurance pays out can be a critical tool in covering end-of-life expenses. According to LIMRA’s latest study on individual life insurance buying patterns, the main reason most Americans purchase insurance is to cover the costs associated with a funeral and burial.

Those expenses may not weigh heavily on the mind of high net worth individuals who have the means to cover those expenses out of pocket, but there are factors that should push high net worth consumers toward a life insurance purchase. LIMRA’s data indicates that many people buy life insurance to leave an inheritance to their children or supplement income in retirement. These are two goals that high net worth consumers can appreciate, but many remain underinsured.

What stops people from buying

High net worth clients may appreciate the potential upsides of life insurance, but they may be put off by the relatively low yields compared to other asset classes. Many high net worth individuals built their wealth through shrewd investing, and the prospect of putting liquid assets into a life insurance account that will not pay out until their death might seem inefficient.

LIMRA found that the second-most cited reason why people didn’t buy life insurance was that they had other financial priorities that demanded their investment. This indicates that financial professionals need to better educate their clients about the benefits provided by life insurance products while simultaneously offering solutions that allow clients to retain liquidity and purchase ]the coverage they need.

Premium financing as a solution

Consumers may be unaware of premium financing, but this is a critical tool that financial professionals can introduce to increase client interest in life insurance products.

Clients who use premium financing receive a loan that pays for the premiums of a life insurance policy. The client must pay the interest on that loan out of pocket, but otherwise, they have essentially gotten a life insurance policy without substantially impacting their liquid capital. That is particularly valuable for high net worth clients who want to maintain freedom to invest in other assets alongside life insurance.

Premium financing is not for every consumer, and some clients may not qualify for the loan needed to finance a policy. Still, this is a powerful tool for financial professionals who want to power through consumer objections and get clients the insurance they need.

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Highland Capital Brokerage

Highland Capital Brokerage

Highland Capital Brokerage is committed to developing client-focused relationships with financial advisors using our core competencies of life insurance, annuities, and long-term care. We distinguish ourselves by providing point-of-sale support, advanced marketing, and creative estate and business planning techniques.
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