Reasons People Don't Buy Life Insurance

Word count for this week's article:  398

Approximate time to read:  About 1.6 minutes



For the last essay of Life Insurance Awareness Month, we’ll look at some common reasons why people say they don’t buy life insurance. Life Insurance Marketing and Research Association (LIMRA) routinely conducts surveys of why people don’t buy life insurance and I’ll address some of those reasons below. The percentages add to more than 100 because respondents were allowed to choose more than one answer.

57% of respondents said the primary reason for not purchasing life insurance was that it is too expensive. Now “too expensive” is obviously a relative term, but $1,000,000 of 20-year term insurance will cost a healthy 30-year-old male less than $30/month (>$25/mo. for a female). I believe most people could come up with that amount if they wanted to.

Coming in second place, 47% said that they had life insurance through their employer. That’s great, but there are statutory limitations on group term insurance. Generally, the same amount or same formula must apply to all employees. If you offer two times salary to executives, then two times salary must be provided to the non-union rank and file as well. 

No one complains about free insurance, but it should serve as a base, not as one’s entire program. Additionally, it may not be entirely free. The IRS says that income tax is due on the economic benefit of amounts exceeding $50,000. That is still a great deal, but it’s not free.

Third place (44%) was “I plan on buying, I just haven’t gotten around to it.” Recognizing the need for life insurance is a step in the right direction, but the decision rests with the insurance company, not the applicant. One’s current health status isn’t guaranteed, not to mention potential accidents.

Bringing up the rear with 30% is “I’m single with no children.” While that may be a valid excuse for a mid-50s divorced individual with emancipated adult children, a 22-year-old just starting out that envisions himself/herself with a family one day could experience significant lifetime savings by locking in an extremely favorable premium.

The bottom line is we can usually find a way to get what we really want, be it a car, a vacation, or college for our kids. And if we really want life insurance to protect our loved ones, we will find the premium, be it $30/month or $500/month. If not, we’ll find an excuse to ease the cognitive dissonance.