Generally speaking, many people lack a strong understanding of life insurance. Some of these individuals may be your clients.
Below are five life insurance myths debunked and ways you can troubleshoot these misconceptions in your sales pitch. As you prepare for your next appointment, consider broaching the subject of life insurance with this information in mind.
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Myth #1: Life Insurance Costs Too Much
It’s probably less than they think! Odds are you’ve probably heard this point plenty of times. Life Happens and LIMRA’s 2018 Insurance Barometer Study tells us that 63 percent of Americans won’t buy life insurance because they think it costs too much. It’s one of the primary things to keep in mind while you’re practicing your sales presentations.
Participants in the study were asked what they thought a healthy, non-smoking 30-year-old would pay annually for a $250,000 term life insurance policy. Well over half of the group overestimated the cost of the policy, with most consumers naming a price three times larger than the actual quote. Forty-four percent of millennials, and 24 percent of everyone else, thought the policy would cost more than $1,000 annually.
How can you fight the collective misbelief that the price of life insurance is just too high? Show them the numbers by handing them an illustration. You can also try giving them a comparison they can relate to.
According to the Bureau of Labor Statistics, the average household dishes out $3,008 a year to eat away from home. The life insurance policy in the example above? It would only cost that 30-year-old $160 annually in exchange for more financial security and peace of mind for years to come.
How can you fight the collective misbelief that the price of life insurance is just too high? Show them the numbers with illustrations!
Myth #2: Buying It Online is Easier & Cheaper
Not always. These days, consumers will bargain hunt and purchase select products at lower prices online. What some don’t realize, however, is that life insurance policies aren’t always cheaper online.
Guaranteed issue or simplified issue products found online don’t require applicants to go through the full underwriting process. Since insurers take on more risk with these policies, they often charge higher premiums. Moreover, insurers may add specific terms and conditions in policies bought online that could limit the policyholder’s current or future benefits. Shoppers unfamiliar with insurance jargon could have a harder time finding and understanding these clauses, and it could cost them.
In Life Happens and LIMRA’s 2015 Insurance Barometer Study, only 27 percent of participants agreed that less underwriting could affect the price of life insurance. What’s more, over three-quarters of participants estimated that life insurance costs the same when bought online versus offline, and a mere seven percent estimated it costs more online.
During your sales appointments, inform your clients of the dangers of navigating the online market and the value of underwriting. In addition, let them know how your experience and expertise can help get them the policy that best suits their needs. You’re not only potentially saving them from a costly purchase, but you’re also giving them more reason to come back to you in the future if they’re not ready to buy that day.
Myth #3: Only Medical History Affects Its Premiums
There’s more to it! While most people know their medical history affects how much they pay for life insurance, it seems many are not aware of a number of other variables that insurers look at before offering them coverage at certain rates.
Many people aren’t aware of all the variables insurers look at before offering them coverage at certain rates.
The 2015 Insurance Barometer Study found 78 percent of people agreed their health/medical history could affect the price of their life insurance. Fewer people agreed that their family health/medical history (64 percent), lifestyle/hobbies (49 percent), driving record (36 percent), and credit history (34 percent) could affect its price. To build a stronger rapport and more trust with your clients, ask if they know what factors can affect the cost of their life insurance policy. If they can’t name them all, let them know what factors they’re missing and why these factors affect their premiums.
Myth #4: It’s Only Good for Funerals & Inheritances
That’s just not true! An unfortunate stigma attached to life insurance is that of death. Traditionally, people bought life insurance for its death benefits, and these benefits are why many still do. About 91 percent of people participating in Life Happens and LIMRA’s 2018 study reported a reason they have life insurance is to cover their burial and final expenses. But, life insurance offers several living benefits that your current or prospective clients might not realize.
Allianz Life Insurance Company of America’s 2018 Life Insurance Needs Survey found most U.S. adults (88 percent) know about the death benefit part of permanent life coverage. Simple enough. However, 51 percent of those surveyed were unsure if or didn’t think that cash value from the same kind of coverage could be used to supplement their retirement income or help pay for college, among other financial needs. And, 66 percent didn’t know or think that benefits paid from life policies aren’t subject to tax.
As you’re talking with clients, remember to put the life back into life insurance. Lay out and explain all of its possible living benefits. If you’re working with older adults with no kids, point out that they can use life insurance to generate cash flow in retirement. For young parents, make sure to mention that they could use it down the road to pay for their kids’ college tuition. In addition, cover the riders they can add to their policies that offer living benefits, such as accelerated benefit payouts if critical illness strikes.
As you’re talking with clients, put the life back into life insurance. Explain all the living benefits!
Myth #5: It’s OK to Wait to Purchase a Policy
No, not if they need one! Deep down, your prospects probably know they shouldn’t put off buying life insurance, but it’s something they need to be reminded of. Why? When they’re making a budget and listing the items they believe their money needs to go toward, chances are, life insurance premiums may not make the cut.
There are several reasons people put off buying life insurance. Those who are young and healthy might look at the glass half full and blindly trust that they have more time. Others place items that will bring them instant or near future gratification higher on the list. At the bottom of it all, a number of people don’t make life insurance as much of a priority as it should be.
Forty-eight percent of participants in Life Happens and LIMRA’s 2018 study estimated they’d feel the financial impact of losing their household’s primary wage earner within six months, and 54 percent estimated they’d feel it within one year. Yet, when asked what financial priorities keep them from buying some or more of life insurance, 50 percent reported paying for additional living expenses, such as internet, cable, and cell phones, and 21 percent reported paying for day-to-day recreational activities, such as going out to eat, movies, or shopping.
As humans, it’s not grim to consider our days numbered, rather it’s wise and realistic. We’re all aware that our health can change in the blink of an eye and decline as we age. However, people still wait… and wait… to buy life insurance. Some do so unaware that putting off buying a policy until they’re older will likely end up costing them more, especially if they or a close family member suffers from a critical illness during that time.
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When it comes to marketing life insurance, remember that, while educating is key, just bringing it into the conversation is a major step. Sometimes, people need that extra reminder of the urgency of the situation to shift their priorities and make the right move.