What Your Clients Think They Know About Their Life Insurance—But Don’t

Happy senior couple holding hands and using laptop while having a meeting with financial advisor in the office. Senior man is pointing at something on laptop.

Haven Life

Survey Reveals Consumer Confusion and Unrealistic Expectations

Every year it seems like prospective clients are becoming a little more difficult to reach and a little less accessible as they choose instead to rely on online resources, “experts” and digital tools that are available with one keyboard stroke.

Nevertheless, an advantage that you will always have as a financial professional is your understanding of human nature. Whether it’s a client whom you’ve been with for years or a new client you’re still getting to know, there is no replacement for your one-on-one relationships that demonstrate your expertise and care. This is especially true when you are discussing a complicated topic like life insurance where consumers often have faulty information and/or assumptions about their own benefits and needs.

If you are thinking this is rarely the case, think again. In a recent survey from Haven Life, one in three working adults admitted that they did not have a good level of understanding about their own employer-sponsored life insurance options.

As a financial professional, you have the opportunity to provide guidance and education to clients who are not receiving it at their workplace or other sources. You also have the human insight to realize people are often reluctant to admit they need help, especially when it is a topic that they may already feel they are supposed to understand.

Consumers Often Don’t Know…What They Don’t Know
Only recently has financial literacy and education gained attention as a subject that should be taught in high schools and alongside traditional college courses. Trendy words like “adulting” try to nudge consumers to proactively address their own knowledge gaps but without identifying objectives and resources. This was clearly illustrated in the following survey results from employed adults:

  • 29 percent of respondents indicated they had “somewhat” or “no” understanding of the life insurance benefits their company provides.
  • Similarly, 31 percent of respondents have “somewhat” or “no” understanding of their company’s health insurance benefits.
  • 17 percent of respondents indicated they have only “somewhat” or “no” understanding of the difference between life insurance and health insurance benefits.
  • Nearly 20 percent of respondents admit they don’t know if their company even offers life insurance benefits.
  • Nearly 30 percent of respondents said the only reason they understood the difference between life and health insurance is because a human resources colleague or financial planner explained it to them.

Survey Results Reveal Coverage Expectations Aren’t Aligned with Reality:
For clients who know they are eligible for life insurance benefits through work, additional questions arise about what these benefits entail. Our survey reveals a startling disconnect between the payout employees would receive and the payout they think they would need:

  • 77 percent of respondents would like a life insurance payout of three or more years’ worth of their salary.
    • 25 percent seek a payout of three to five years’ worth of their salary.
    • 17 percent seek a payout of six to eight years’ worth of their salary.
    • 35 percent seek a payout of nine or more years’ worth of their salary.

Yet, as you already well know, the standard employee-sponsored life insurance payout is one year. Considering that most Americans only have enough savings for one year, this leaves an overwhelming gap to fill in the event of a death. While this is not new information to you, this alarming insight provides the perfect opening to probe expectations with prospective clients and build further trust. Together, you can show them what the life insurance payout would be and compare that number to what they would like it to be, leading to a discussion of how they can supplement their employer-sponsored benefits with additional life insurance coverage.

Trust and Professional Reliability Will Overcome Lack of Knowledge and General Mistrust
You may have noticed that, as human beings, what we say and what we do don’t always match up. Because humans are creatures of interesting and odd habits, respondents said things like:

  • 36 percent would prefer to stash their money under the mattress.
  • 18 percent said at the time of the survey that they would transfer all their money into Bitcoin.
  • 11 percent find themselves called to the latest series of celebrity endorsed NFTs.

Despite these alternative routes that dominate headlines and social media, the focus for the average American is trust and reliability, something only a company with a long, trustworthy legacy can provide alongside an experienced financial advisor.

An overwhelming 85 percent of respondents indicated concern for an impending recession and the majority said they could not pay off all their household’s debt at this moment. The importance of reliability in uncertain times cannot be overstated.

We found that most respondents would trust building long term savings with a life insurance agency backed by a company with a history of longevity, financial stability, and brand reputation. Reliability is crucial in a lasting client relationship as you help your client build financial security that will hopefully span generations.

How Can You Use This Information to More Deeply Engage Prospects and Clients?
Let’s face it, it’s a lot easier for someone to admit they don’t understand their work benefits on an anonymous survey versus saying that out loud across from a financial expert. None of us enjoy admitting we don’t know something that everyone else seems to have a handle on and these survey results are an actionable way to start a conversation without putting your client on the spot.

Leveraging this survey in a conversational way can be a strategic conversation starter. These findings provide a bridge to outline areas that can be confusing and let you explore your client’s benefits in more detail. Specifically, given this information you may consider:

  • Automating a to-do on your calendar to start reaching out to clients in September and October before most open enrollment periods begin.
  • Set yourself apart by creating a deeper learning environment for prospective clients—consider enlisting a Human Resources benefits specialist in the early autumn timeframe and hosting a workshop that explains the most common options for employee benefits.
  • Establish office hours during open enrollment season where you specifically discuss your client’s life insurance benefit options and guide them in their benefit election decision-making.
  • Use this time of year as an opportunity to open a deeper discussion about the gap between what their expectations are for their family if something were to happen to them and what their reality is; this is a perfect bridge to discuss other options to shore up that gap.
  • Ask your clients what percent of their salary they think is fair to spend on life and health insurance benefits so that you can get a baseline for where they are at (40 percent of survey respondents said that less than 10 percent of their salary is a fair amount).
  • Rely on the survey to show prospective clients and clients that they are not alone.

There are many points in your client’s life journey, but at all points your client seeks financial security for themselves, their loved ones, and possibly generations to come. Today’s consumer has access to more tools, information, and education than ever in our history yet, as human beings with busy lives and competing priorities, they still falter in areas that can be most daunting like financial literacy.

Knowing where your clients’ knowledge gaps often lie is the first step. Leveraging the Haven Life survey findings or similar digestible data shows them they are not alone and helps open the door for discussion without risk of embarrassing your clients or making them feel judged. Being able to tailor your strategy to every client’s needs will improve your leads, sales, and deep, generational connection to each of your client’s unique life stories.

For more information about the survey, or how to purchase a term life insurance policy, visit https://havenlife.com/.

Haven Life conducted a quantitative survey in October, 2022, and collected 1,089 completed responses. Respondents were between the ages of 18 and 65 and identified as either full-time or part-time employees with a minimum household income of $50,000. 49 percent of respondents were male and 51 percent were female.

Haven Life Insurance Agency, LLC (Haven Life) is re-thinking how people financially protect the ones they love. Haven Life is committed to delivering exceptional products, delightful purchasing experiences, and meaningful moments of service to the modern life insurance customer.

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