Business News

Studies Show That Fewer People Are Buying Life Insurance

Why is this happening? and Why is it a big deal?

Written by: Paul Bloodsworth

July 1, 2024

[6 minute read]

The Studies are Consistent: Fewer Households are Covered

Stats show that fewer households are purchasing life insurance. As much of the population is financially illiterate, this may come at no surprise. I mean, there's virtually no financial education included in the curriculum with our public school systems. So, it should not be shocking that many people do not understand the value of financial security through life insurance.


Let's talk statistics.

  • According to LIMRA, 52% of consumers held a life insurance policy of some type in early 2023, a drastic drop from the 2011 statistic of 63%.
  • This trend is also revealed in the ACLI data that showed a drop from 69% in 1998 to 59% by 2019.
  • We're not even going to go deep into the Covid-19 impact... that's coming in a future article...


"A broke mindset never understands how the wealthy were also broke at some point..."

and

"the 3rd generation wealthy cannot understand how they are now broke..."

[Hint: Life insurance can begin generational wealth, and the lack of life insurance can be the reason generational wealth is lost.]

In this article, we will highlight 4 major points:

Why is Financial Education not incorporated into our school curriculum??

What Triggers People to Buy Life Insurance?

It's true.. Most people do not think about dying. It's understandable to a degree. It's the end of the road. Well, it is for you, but one person's death almost always financially impacts the ones left behind. Between outstanding debts and even funeral costs, many people croak and leave a disastrous amount of financial burden on loved ones.

So, why is it that some people suddenly start considering life insurance? Well, let's again look at the statistics...

  • When the great Kobe Bryant suddenly died in the helicopter crash in 2020, the volume of life insurance application submissions spiked by 50% over the days that followed.
  • It only took one week for the number of submissions to fall back to normal levels


There are countless stories of new policyholders waking up to the value of life insurance after experiencing or witnessing an uninsured person's death. Even if there are no debts left behind, a funeral alone can now cost between $10,000 and $15,000, and there are not many funeral homes operating as lenders...


We've seen deceased bodies sitting at morgues for weeks awaiting families scrambling to raise funeral money.


Bottom Line: People are generally uneducated procrastinators. And, it's typically the families who "pay" for the ignorance.

IMPORTANT!

Determining which type of life insurance is best for you is NOT a simple decision. It is always recommended that you seek a professional insurance advisor who is licensed to act as a fiduciary on your behalf.

There is NO consulting fee for almost all advisors in this space. If you'd like speak with a licensed advisor, click here.

What's the Real Reason the Trend is Spiraling Down?

"It's the Economy, Stupid"

and the lack of education

The Current Economy

Here in 2024, the US is experiencing one of the worst inflation periods of our lifetime. There is no doubt that everyone is feeling the impact of the current administration's poor policies and economic decisions.

To name just a few negative impacts:

  1. Increased Cost of Living
  2. Decrease in Purchasing Power
  3. Wage Pressure


So, people are budget-tight, and forced to make the decision between paying for their electric bills or their life insurance. And since living in the dark with no cooling and heating sucks, guess which payment gets dropped...

The pandemic-era stimulus checks simply did not have a positive impact on the general public's ability to thrive in this economy. The "stay at home" checks built up in "excess savings" over the first 18 months of receiving, then the inflation squeezed the people so tightly that these "excess savings" depleted ENTIRELY by 2024.


Lack of Education

Again, people are not taught the basics of financial literacy in our school systems. Furthermore, people simply do not seem to care for spending money on nontangible goods or services that do not immediately bring a dopamine-high.

Life insurance and retirement planning doesn't seem to be on the priority list for most Americans. By the time many discover the NEED for life insurance, they find themselves aged and in poorer health.


And what qualifies you for life insurance? YOUR AGE AND HEALTH


Life Insurance Agents are Hurting Too...

Ever hear of a chargeback??

It's a historical fact: The Life Insurance industry booms when there is a crisis. This goes back to the previous discussion. When people experience someone's death, or a life-threatening event, they become awakened to the need for financial planning.

Remember the Covid pandemic??

Life Insurance sales skyrocketed during the initial stages of the pandemic. Many life insurance agencies experienced doubling and tripling of new applications. BUT, how many of these new policies have remained on the books? We are getting reports that 40% to 50% or more of these new polices have already lapsed.

One MUST ask why?

The high inflation and failed economy quickly eliminated the ability for many people to maintain these newly written policies. When a new policy lapses, a chargeback follows.

  • It's simple; the carrier pays the agent an advanced commission; the policy lapses; the agent has to pay the money back.

This is NOT a smooth transaction. Many agents fail to plan for this chargeback. The money has likely already been spent on the agent's increased cost of living. If the debt is not paid, the agent's debt is rolled up to another agent's responsibility, and the initial agent is at high risk of losing his or her's ability to continue business.

Post-Covid, these stories are becoming more and more prevalent. We've learned of some agents driving Uber routes just to pay off accumulated carrier debt. (and now our government has issued new legislation cutting into Uber drivers' ability to generate income)

Bottom Line: The inflation and economy is squashing our nation.