A study performed by LIMRA and the LIFE Foundation has revealed many consumer misunderstandings of life insurance coverage.
LIFE Foundation and LIMRA released a report based on the findings of a joint study that has shown that consumers have many misunderstandings about life insurance – such as its cost – and that this might be deterring them from seeking to obtain coverage that could be very beneficial to them.
The participants in the survey were requested to provide their best guess as to how much a 20-year level-term life policy of $250000 would be for an individual who was 30 years old and healthy. Though the actual cost is approximately $150, the average estimate by the respondents was $400. Among the participants who were young adults – and who have the greatest opportunity to qualify for the lowest premiums – the cost was overestimated by an average of almost seven times what it truly was.
Almost one in three consumers think they need more life insurance.
The 2012 Insurance Barometer Study showed that among those who felt this way, 20 percent already had a policy and nearly half did not have any coverage at all. That said, one of the primary reasons that these individuals gave for failing to obtain any more coverage than they had was that 83 percent of the respondents felt that it would be “too expensive”. At the same time, 85 percent said that they needed the money for “other financial priorities” and therefore would not be able to afford the additional coverage that they felt they needed.
CEO and president of the LIFE Foundation, Marvin H. Feldman, CLU, ChFC, RFC, said that “If someone offered to sell you a gallon of milk for $10.00, you would likely choose to spend your grocery budget on other necessities, knowing that the actual cost is closer to $3.50.” He added that “If people think that something is too pricey, they often won’t give it a second thought.”
Feldman went on to explain that the actual cost of term life insurance coverage has dropped by about half over the last decade and that there has never been a time that it was more affordable to purchase.