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Consumer behavior: Life insurance 2020

Find out what goes through the mind of Americans' when they're purchasing a life insurance policy.

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The United States has the largest life insurance market in the world. But what goes through consumers’ minds when they’re considering purchasing a policy? To find out, we turn to three recent industry studies from Deloitte, New York Life and LIMRA that shed light on consumers’ journeys.

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What motivates people to buy life insurance?

Having children is the No. 1 reason people buy life insurance

Some 43% of buyers said children were the most important factor in their purchasing decision, according to a 2015 life insurance study from Deloitte. Other major life events that encourage people to buy a policy include buying a home (35%), experiencing a change in financial situation (33%) and getting married (20%).

Major life event Specific life event that led to policy purchase
Having children
  • Considering having a child — 63%
  • Giving birth — 16%
  • Hitting a milestone in a child’s life — 16%
Buying a home
  • Becoming a first-time homebuyer — 35%
  • Making the first mortgage payment — 30%
  • Getting a mortgage — 20%
Experiencing a change in financial situation
  • Gaining a new financial dependent — 33%
  • Spending an unexpectedly large sum of money — 16%
  • Other financial changes — 16%
Getting married
  • Thinking about future financial considerations — 63%
  • Thinking about current financial situation — 28%
  • Deciding to get married — 25%

Natural disasters, gaining citizenship and entering the workforce are other key motivators

These important but less common events also encourage people to take action and buy coverage.

On the other hand, renting a home and becoming single can steer people away from life insurance

Renting a home decreases the likelihood of buying a policy by 13%, and becoming single reduces it by 8%. This could be because there’s less financial responsibility tied to these moments.

More than half of respondents found their interactions with agents or advisers helpful

Of those who purchased a policy, 52% said an agent or adviser offered clarity and affected their decision to buy life insurance.

Younger consumers prefer to source information online or via mobile

Millennials place more value on digital channels than on personal interaction. The top reason? It’s more convenient.

Only 27% of people who didn’t end up buying a policy said life insurance is important to them

Of those Deloitte surveyed who said they wouldn’t buy life insurance, 66% said providing for their family and 61% said paying bills were more important financial priorities.

Most policy lapses are linked to a change in the policyholder’s financial situation

Of people who let their policy lapse, 27.7% said they couldn’t afford to keep their coverage.
Other major reasons for allowing a policy to lapse:

  • Found a better plan, forgot they had the policy or thought they were paid up — 24.9%
  • Didn’t want to pay for a policy anymore — 16.9%
  • Lost their job — 10.1%
  • Job started offering life insurance — 9.3%

After buying a policy, most consumers want further contact by email

Nearly 40% of policyholders said they prefer contact from their insurance company by email rather than by phone.

What do the different generations think about life insurance?

Just 10% of millennials have enough insurance coverage to meet their financial obligations

Respondents to a 2018 New York Life study assessed their financial needs, including funding mortgages, retirement accounts and college tuition. They then reported an average life insurance gap of $352,000.

In contrast, Gen Xers say their policies cover 48% of their needs

Generation X self-reported an average gap of $253,000, which is significantly lower than that of millennials. To compare, baby boomers said they needed $110,000 to bridge the gap between the coverage they have and the coverage they need.

Millennials are the least prepared for unexpected life events

Around 44% of millenials aren’t financially prepared to deal with the death of a breadwinner, while another 42% couldn’t cope with the possibility of losing their job.

How do consumers seek financial advice?

Most consumers think life insurance is three times more expensive than it actually is

When asked to estimate the annual price tag of a $250,000 term life policy for a healthy 30-year-old, more than half the respondents to a 2019 LIMRA study said it would be $500 or more. LIMRA reports an average cost of close to $160 a year.

Consumers use social media to search for financial advice

In 2019, 32 million people used Facebook and 20 million turned to YouTube to build knowledge and awareness. What’s more, 34% of people said they’d research financial professionals on social media platforms like LinkedIn, Facebook and Yelp.

Millenials and Gen Xers are in the market for financial guidance

Compared to the 29% of millennials and 17% of Gen Xers, only 9% of baby boomers are looking for financial advisers.

Sources:

  • Deloitte’s Life Insurance Consumer Purchase Behavior Study, September 2015 https://www2.deloitte.com/content/dam/Deloitte/us/Documents/strategy/us-cons-life-insurance-consumer-study.pdf
  • New York Life’s Life Insurance Gap Survey, November 2018
    https://www.newyorklife.com/newsroom/2018-life-gap-survey-milennials
  • LIMRA’s Life Insurance Barometer Study, 2019
    https://lifehappenspro.org/barometer

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