Car Insurance, Home Insurance, Why Not Life Insurance?
“People buy life insurance for one of two reasons, they either love someone or they owe someone”. These were the words spoken by a very wise life insurance professional during a national meeting of some of the top insurance advisors in the country, The Forum 400. What he said struck me as so true yet so simple.
Let’s face it, auto and homeowner’s insurance are both mandatory – why do you think that is? Because you can’t drive a car off the lot until you can prove you have auto insurance. You also can’t close on home financing without homeowner’s insurance. Most people finance both of those purchases – meaning they owe money. If you crash the car or the house burns down, the bank is owed money. The car or auto insurance in force guarantees that the bank gets paid. The bank does NOT want the collateral in the form a badly destroyed automobile or a pile of ashes.
Liability is another reason auto and homeowner’s insurance is required. If you injure someone while driving your car or if someone gets hurt on your property, auto and homeowners insurance will protect you and the bank in the event of a lawsuit.
According to the National Fire Protection Association (NFPA) in 2018, public fire departments responded to 1,318,500 fires – 3,612 per day. By contrast, according to the United Nations World Population Prospect report, approximately 2,720,200 people die every year in the United States, that is one every 12 seconds. According to the United States Deaths Clock, as of this writing (November 20, 2019 at 2:13pm), 5,096 have died …. 5097, etc. (I had to think about the next paragraph for more than 12 seconds).
Every 12 seconds someone dies in the United States …. and they are not all old people. Many of us have heard about tragic deaths of friends with young children, with mortgages, with dreams.
Read Tara Newby’s story summary further below.
Why then do so many people have such a negatively visceral reaction to the idea of buying life insurance even when they are experiencing huge life-changing events such as getting married or having children? Many people accept the offer from big box stores to insure an appliance, a television or a refrigerator, or from the cell phone company when buying a mobile phone. Does this mean they love their mobile phones and appliances more than they love their kids or their spouses?
It’s a sad fact that ownership of life insurance is at a 50-year low. According to the Life Insurance Research Management Association (LIMRA), life insurance ownership has declined from 63% in 2011 to 57% in 2019. This decline has occurred during a time when Millennials, the largest generation in U.S. history, have reached their working years and are buying homes and having children. There has never been a greater need for the protection that life insurance offers, yet the demand is just not there. While I have been suggesting that maybe people love their mobile phones more than their children, any reasonable person knows that this statement is just NOT TRUE. So, what is the problem?
LIMRA states that the top reason for insufficient life insurance coverage is the general lack of understanding regarding price. The study states that “when asked how much a $250,000 20-year level term policy would be for a healthy 30-year-old, the median estimate was $500 – more than three times the actual cost”. (emphasis added)
In addition to misconceptions surrounding price, another major issue lies with the life insurance industry’s underwriting process. Simplifying the very complicated and burdensome underwriting process is paramount to increasing demand for life insurance. According to The 2019 Insurance Barometer Study which is conducted jointly between Life Happens and LIMRA “nearly half of Americans were more likely to buy life insurance using simplified underwriting”. Simplified underwriting generally results in getting coverage much more quickly because it makes use of publicly available data for risk classification decisions for life insurance pricing, enabling purchase without requiring a medical exam or blood and fluids for medical testing. The industry has had no choice but to change, and it is changing fast. It has made great strides in the area of simplified underwriting with many insurance companies adopting the practice.
AgencyONE is implementing a new technology platform called Vive – the groundbreaking paperless term solution. Vive will allow life insurance advisors to complete an application in 5 minutes on a computer, tablet or phone. Many of these cases will also be eligible for simplified underwriting with generous coverage amounts in excess of $1,000,000 available for those up to age 60 or older in many circumstances. Please click here for updated information about Vive.
Whether your clients love someone or owe someone, it is up to you as the advisor to clearly and accurately communicate the true value of life insurance and the important changes occurring in the industry. The increased efficiencies make buying life insurance for your clients’ loved ones much easier and more affordable. Preston Newby’s advisor did not allow Preston to only protect the banks that were financing his home and auto. Unfortunately, Preston’s life tragically ended at age 24 but because his advisor discussed the need for life insurance, Preston’s love for his family led to a decision to purchase the coverage that allowed his family to successfully carry on financially without him.
AgencyONE strives to keep you up-to-date and abreast of all the changes, efficiencies, and new technologies occurring in the life insurance industry.
Please contact AgencyONE’s Marketing Department at 301.803.7500 for more information or to discuss a case.
