What clients really think about buying life insurance

Life insurance is one of those all-to-common things in financial services: a solid value proposition that prospective customers find ever more creative ways to avoid buying. Canada’s post-pandemic inflation rate is just one of the reasons otherwise intelligent adults choose not to do the right thing for their financial future.

If only we could read clients’ minds.

Since we can’t, a review of comments from financial wellness program attendees will have to do. Check out these four real-world excuses.

Life insurance is a waste of money

It’s common for people to feel that life insurance may be a waste because most people don’t think they’ll die during their working years. They aren’t wrong, but no-one knows for sure.

Many put off a purchase because they feel they can’t afford it right now. Some even think their family may not need the money. So they put it off.

I have enough insurance at work, or I have mortgage insurance

The average person doesn’t sit around thinking about how much insurance they need.

Having one year’s salary, or their mortgage paid off can seem like a big windfall that will cover their family for a while. But people don’t really take the time to map out the financial hole losing their salary would create, and for how long that would impact their family.

It will cost half as much for my spouse to live if I pass away

People assume they’d spend half as much if their spouse were to pass away. Sure, the grocery bill will be reduced and there will be less use of water in the household.

But the property tax isn’t based on how many adults are in the house, and the power bill won’t change that much. If there are children involved, then the reduction in expenses will be even less noticeable.

I’m not wealthy enough to have estate issues

This is one of the most common beliefs. People feel that only the ultra-wealthy must think about their estates.

When we explore this with wellness program participants, we find out they don’t realize that if their RRSP passes to a non-spousal beneficiary, it’s a deemed disposition. That makes it fully taxable on the final return of the deceased.

That means any sizable accounts will be ravaged by taxes. What passes to the heir will be greatly reduced. Many of your clients may realize this. Still, we educate plenty of people with advisors who don’t.

When I talk with program participants and explore the root of their beliefs, here’s what it boils down to — people have trouble understanding how much coverage they need, and they struggle to justify spending money on life insurance.

The good news is that working on your clients’ cash flows can solve these issues. Helping your clients free up money to cover insurance costs without impacting their lifestyle, and helping them see in greater detail how much their life costs, helps them take ownership over how much coverage they really need.

Too many adults are underinsured. According to LIMRA’s Life Happens study, 57% of Canadian adults say they have life insurance, but 8.4 million adults realize they need more coverage.

We’ve found a significant number of program participants who feel they have enough, and only realize they have a serious gap after they complete a quick test. People need an easy way to figure out how much coverage they need. Then, showing them how to afford it without giving up things they love removes the other barrier.

There are a lot of competing priorities. Your role is to help clients find the money to fund ideal life insurance coverage.

You can provide your clients a great service by considering their cash flow as part of an overall insurance strategy. Don’t assume that higher income, or higher net worth clients won’t benefit from spending management strategies. Not only can these concepts help them build more wealth, it can protect that wealth too.