In January of 2016, LIMRA (Life Insurance and Market Research Association) surveyed 2,074 adult individuals who were also the financial decision makers in their households about insurance. Overall, 1 in 4 people felt they needed more life insurance protection. When asked why they didn’t buy more when they knew they needed it, these consumers stated that 1) life insurance is too expensive and 2) I have other financial priorities right now as the top reasons they did not purchase life insurance.
I would like to expand on these reasons and make a case for why they should not hold up your decision to buy life insurance.
Reason # 1 – Life insurance is too expensive.
LIMRA asked consumers how much they thought the average annual cost of a 20-year, $250,000 term policy for a non-smoking 30-year-old would be. Consumers under the age of 30 guessed the annual cost would be $500 and consumers over the age of 30 guessed $400 per year. Both groups overestimated the actual cost by hundreds of dollars. The actual average annual cost of this policy is $160. That’s just over $13 per month.
The average annual cost of a 20-year, $250,000 term policy for a non-smoking 30-year-old is $160.
I encourage you to go to Quotacy’s quoting tool and run a term life insurance quote on yourself. You may be pleasantly surprised at how much coverage you can own for pennies a day. Your age, gender, and health all affect your costs, but because Quotacy works with multiple insurance companies, there are many offers you can choose from and compare.
Half of U.S. households would feel the financial impact of the death of a primary earner within six months and more than a third would feel the impact in less than one month.
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Reason # 2 – I have other financial priorities.
Around 50 percent of surveyed Millennials (majority of whom are in their 20s and 30s) and just under 40 percent of surveyed Gen Xers (those between ages of 35-55) stated that other financial priorities are keeping them from purchasing life insurance. See the chart below for more information. It illustrates what percent of surveyed individuals (by age group) stated a specific financial priority is keeping them from purchasing some or more life insurance.
|Financial Priorities Keeping Consumers from Buying Life Insurance||Millennials||Gen Xers||Boomers||Seniors|
|Required cost of living expenses (mortgage, groceries, electricity, etc.)||54 %||65 %||72 %||62 %|
|Additional living expenses (Internet, cable, cell phone(s), etc.)||46||51||51||40|
|Building savings account(s) or emergency fund(s)||48||35||30||37|
|Managing accumulated debt (credit card, other loans, etc.)||38||42||36||23|
|Saving for retirement||30||37||37||20|
|Saving or paying for a new car, boat, or second home||33||26||21||15|
|Day-to-day recreational activities (going out to eat, movies, etc.)||30||23||11||16|
|Saving or paying for college or student loans||29||23||9||2|
These individuals stating that other financial priorities are holding them back may also be part of the majority overestimating the cost of life insurance. They think they cannot afford life insurance because they have other things to pay for. However, what if they die prematurely? Who will pay for those needs and wants then? Half of U.S. households would feel the financial impact of the death of a primary earner within six months and more than a third would feel the impact in less than one month. In other words, 1 in 3 households would have immediate trouble paying living expenses if a breadwinner died.
The death benefit from a term life policy would help your family pay for expenses such as:
- Funeral and burial
- Rent/mortgage payments
- Car payments
- Utility bills
- Food and clothing
- College tuition.
Are there areas in your budget you can cut expenses to have the flexibility to purchase life insurance? You shouldn’t have to change your whole lifestyle just to be able to afford life insurance, term insurance is pretty affordable as it is, but it’s always good to review your budget. Maybe you’re spending money on things you don’t need. Do you use all of your data on your phone plan? Maybe dropping from a 10GB plan to a 5GB plan would better suit you. Do you watch all the expensive cable channels you pay for? Maybe drop cable and get an antenna and Netflix. These are just examples. The point is: term life insurance can be adjusted to fit most budgets and, fun fact, on average term life insurance costs less than the monthly phone or cable bill.
Term life insurance is extremely affordable when you purchase it at a younger age. Not only are you statistically further from death, but you are probably the healthiest you will be from here on out. Don’t put off buying life insurance any longer.
Image credit to: Caroline Hernandez
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