Americans are growing remarkably lax about life insurance. So much so that more financial consumers say they would rather leave behind family photos (54%) than a death benefit from a life insurance policy (49%), according to a new survey from Life Happens.
That’s a bad decision on many fronts – the big one being heads of household will leave little or no financial resources for their loved ones behind after they pass.
“Although the majority of Americans understand the value of life insurance, they still are not making it a priority and getting the coverage they need to protect their families,” states Life Happens, a nonprofit that promotes the value of life insurance for consumers. “And while we all value the memories conjured up by a photo, life insurance is the safety net that helps surviving dependents move on and create new memories.”
So why do so many Americans downplay or go without life insurance? Here are five big reasons why.
Reason No. 1 that Americans don't want life insurance: It's not 'sexy'
Too many Americans live in a different economic world where keeping up with the neighbors is more important than a family's financial stability, says Brian McFedries, an insurance agent at Smart Choice Insurance Services in San Diego, Calif.
”Life insurance is not as sexy as a new car or expensive vacation,” he says. “You just can't show your life policy on social media like you would photos of a new car or vacation. All you have to do is look at the housing crisis a few years ago. It used to be the last thing anyone does is miss a mortgage payment. Today it is commonplace because the expectation is someone will be there to bail them out.”
Reason No. 2: Insurance firms do a lousy job of selling life insurance
Breanna Reish, a certified financial planner with TriCord Advisors Inc. in Southern California, says financial consumers don’t have life insurance presented to them in the right manner.
“Some people may respond to the 'what if you die' approach, but others need to see what that looks like and how it will really affect their life.” says Reish. Plus, she adds, consumers may be sick of being "sold."
“Some people have a bad view of insurance because there are some producers out there that will sell anything they can to anyone that is breathing,” she says. “Some do it because it is what they are taught, others do it to hit quotas. It's sad but it’s true.”
Reason No. 3: Americans think life insurance is too expensive
One of the biggest reasons why Americans avoid life insurance is because they think it is a lot more expensive than it actually is, says Richard Reich, president of Intramark Insurance.
“In fact, the 2015 LIMRA study found that 80% of consumers misjudge the price for term life insurance, with Millennials overestimating the cost by 213%, and Gen X-ers overestimating the cost by 119%. Despite the fact that nearly one-third of Americans say that they believe they need more life insurance, more than 50% reported in 2015 that they had no plans to purchase it.”
Reason No. 4: A lack of good information
Chris Huntley, owner of Huntley Wealth & Insurance Services in San Diego, Calif., says the primary reason people aren’t protecting their families with life insurance is lack of information.
“Despite insurance literacy advocates like LifeHappens.org and InsuraceLiteracy.org, LIMRA estimates that 65% of Americans won’t buy life insurance, because they believe it is too expensive.”
Additionally, half of Americans claim their cable & cell phone bills prevent them from buying life insurance.
“This is merely an issue of priorities,” Huntley says. “ When watching a re-run of “The Big Bang Theory” is more important that taking care of the financial health of your loved ones, I believe some priorities need to be rethought.”
Reason No. 5: General indifference
Nahum Daniels, a financial planner based in Stamford, Conn., says that too many Americans simply don’t make life insurance a priority.
“I see it all the time, people are worried about paying bills and saving for retirement, but they don’t think about what would happen financially if there was an unexpected death,” he says. “I caution people against this way of thinking. You never know what’s going to happen, and you want to make sure your family is taken care of.”
Bottom line: No doubt, the drift away from life insurance is a big financial risk for financial consumers who elect to go without it. The thing is, life insurance is a big deal when your family needs it most – and that’s the biggest risk of all.