Financial fears encourage, prevent the sale of life insurance

People who have financial fears are more than five times more likely to say they want to buy life insurance, according to new research from LIMRA. However, at the same time, that research also found that the interest in buying life insurance is often overestimated as affordability is a common reason why people do not choose to buy it.

“Financial fears that correlate with a motivation to buy are also a practical reason not to buy,” said Jennifer Douglas, senior research director for LIMRA and LOMA.

“One would think that someone who is afraid of making ends meet wouldn’t think about buying life insurance anytime soon, but almost one in five are, compared to 3% of people without financial fears. [But] even with the best of intentions, consumers tell us affordability is a major reason they don’t buy the coverage they feel they need.”

Given the findings, LIMRA suggested that financial advisors could better serve target markets by making an effort to understand consumers’ top financial fears and using a holistic approach to address those concerns.

“Reaching the underserved market and closing the life insurance gap is something our industry is struggling with,” said Douglas.

She added: “Understanding and responding to these different fears allows financial professionals to adopt a holistic approach with tailored solutions.”

Fear of driving consumer interest

LIMRA research surveyed 3,000 consumers aged 18-65+ to understand how financial stress influences purchasing decisions.

Seven in 10 respondents said something about their financial situation “scares them.” Four in 10 were worried about making ends meet, and 26% were also worried about saving and preparing.

Younger respondents, in their 20s and 30s, were more likely to worry about making ends meet. Respondents in their 40s and 50s were more likely to be concerned about retirement savings and preparation.

In contrast, 3 in 10 respondents said nothing about their financial situation scares them. Respondents aged 60 and over were the most likely to give this answer.

Chart showing the most prevalent financial fears among life insurance consumers.Chart showing the most prevalent financial fears among life insurance consumers.

LIMRA found that respondents with financial concerns were significantly more likely to express serious interest in purchasing life insurance in the next year.

“It will come as no surprise to advisors that fear can play a role in consumer interest in life insurance,” Douglas said. “We suspect that their role is partly motivation: 92% of those who are interested in buying life insurance in the next year told us something about their financial situation that “scares them”. However, it was not almost never explicitly linked to the financial implications of his or a loved one’s death.”

Chart showing what consumers fear most when it comes to buying life insurance. Chart showing what consumers fear most when it comes to buying life insurance.

Existing life insurance coverage did not play a major role in LIMRA’s results. The study explicitly stated that the difference in life insurance interest between those with financial fear of the mind and those without is not because the latter group already has coverage.

Trust plays a big role

Understanding their clients’ financial problems will help financial advisors provide better tailored solutions and also build the necessary trust, LIMRA’s study suggests.

“We certainly don’t want to promote the use of scare tactics or feed consumers’ fears, but it’s important that consumers understand the risks of not having coverage,” Douglas said. “Furthermore, it is important for financial professionals to be aware of the range of consumer financial fears and attuned to the nuanced narratives that range from immediate survival concerns to long-term uncertainties, fears that spill over into wealth and circumstance. “

The importance of the relationship between counselors and clients was emphasized in LIMRA’s study. Douglas noted that the correlation between financial fears and interest in life insurance “probably says something about people who value protection.”

LIMRA found that existing life insurance owners (73%) were more likely than disinterested non-owners to express financial concerns (62%). Similarly, people who work with a financial professional (70%) were more likely to report financial fears than those who were not interested in working with one (63%). Additionally, those who were interested in working with a financial professional were the most likely to share their biggest fear (77%).

The findings indicate that consumers may be more willing to share their financial fears and concerns if they have a relationship with a trusted financial professional.

In a previous study, LIMRA found the “ability to address all aspects of my financial situation” was the most important attribute for choosing to work with a financial professional for 45% of consumers. Consumers were also more likely to recommend advisors who they felt took more of a holistic approach to addressing their financial needs.

“Clients who describe their financial professional as taking a very holistic approach seem the most likely to recommend, while those who feel their financial professional takes more of a sales approach but perhaps does not fully embrace this model they seem the least likely,” Douglas Douglas. he said.

LIMRA is one of America’s largest trade associations, representing more than 700 members. Its fourth quarter 2023 Consumer Sentiment Survey was conducted in October 2023.

Rayne Morgan is a Content Marketing Manager with and a freelance journalist and copywriter.

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