When it comes to life insurance, people offer a lot of reasons as to why they don’t have sufficient coverage. The expense of premiums is the number one stated reason why Americans are either under insured or don’t have life insurance at all. However, a 2015 study asked participants to estimate the cost of life insurance and the findings were astounding.
According to the study, 80 percent of consumers misjudged the price of term life insurance. Breaking that number down into demographics, Millennials overestimated the true cost of life insurance by 213 percent and Gen Xers, by 119 percent.
This is a huge number of people with a grossly inflated idea of premium costs. Unfortunately, with this many people overestimating costs, there are consequences. In this instance, the result is that the majority of Americans do not have the insurance coverage needed to protect their families.
This study also discussed the two road blocks that stand between consumers and the coverage they need. The first road block the study indicated was simply priorities.
- 29 percent of Millennials cited saving for vacation as a priority over purchasing life insurance;
- 23 percent of Gen Xers said paying for recreational activities, such as going out to eat, going to the movies, or shopping, was a priority over purchasing life insurance;
- 49 percent of seniors and 60 percent of Millennials cited paying for expenses such as Internet, cable, and cell phones as a priority over purchasing life insurance.
The second road block discussed is a lack of financial literacy in regards to how life insurance premiums are determined. Understanding the pricing mechanisms allows consumers to take simple steps to lower the cost of their policies. Healthy living, lifestyle choices, and purchasing coverage in younger years can all lead to savings.