Why People Don’t Buy Life Insurance (2024)

FAQs

Why People Don’t Buy Life Insurance? ›

Cost. One of the most common reasons people don't buy life insurance is that they perceive it as too expensive. However, life insurance premiums can vary widely depending on the type of policy, coverage amount, and individual factors such as age, health, and lifestyle.

Life Insurance Is Too Expensive

Many people overestimate the true cost of life insurance and believe that it is too expensive for them. It is true that the cost of life insurance can vary based on several different factors, but getting coverage can be more affordable than you think.

Cons of life insurance

Even if you can benefit greatly from life insurance, it is an additional cost that you need to budget for. A young family might have a hard time budgeting for any additional regular expense. Cost to buy increases with age.

It has nothing to do with cost, health, or family situation. A majority of people who don't own life insurance just don't understand the benefits. According to a study by LIMRA and Insurance Barometer, 38% of participants cited “I'm not sure how much or what type to buy” as their reason for not purchasing.

People are typically denied life insurance because they fall into a high-risk category. This is often due to health challenges like diabetes, obesity or a previous diagnosis of serious disease.

What are reasons not to buy life insurance? Reasons not to buy life insurance can include not having beneficiaries, not having beneficiaries who need financial support in the event of your death, or not having enough cash flow to pay for premiums.

Life insurance is a popular way for the wealthy to maximize their after-tax estate and have more money to pass on to heirs. A life insurance policy can be used as an investment tool or simply provide added financial reassurance.

Not everyone needs life insurance. People who've accumulated enough wealth to cover their final expenses and who don't have dependents can usually forgo paying for life insurance.

The main advantage of life insurance is financial protection for your loved ones if you pass away. The biggest disadvantage of life insurance is the cost, though it's more affordable than you might think.

Many people are also scared of life insurance because they don't want to undergo the medical exam. They're afraid of the discovery of some undiscovered illness, or they'll turn out not nearly as healthy as they think. If that's the case, highlight types of life insurance policies don't require an exam.

At what age should you stop buying life insurance? ›

At what age is life insurance no longer needed? Life insurance is no longer needed for many people once they reach their 60s or 70s. At this point they have retired, their kids have grown up, and they've paid off their mortgage and other debts.

When considering how much coverage you need, your financial obligations, current lifestyle and long-term plans will likely play important roles. If you can fit the monthly premium into your budget, your 20s are the best time to buy affordable term life insurance coverage.

Perceived cost

Millennials may perceive life insurance as expensive, especially when burdened with student loan debt, housing costs, and other financial obligations. For example, federal student loan debt totals over $1.6 trillion, and millennials hold over one-third of this debt.

Any permanent life insurance policy with a cash value can be used to invest — but for most people, it isn't the best strategy due to high costs and low returns. Buying a term life policy and contributing to a 401(k) or IRA account is often a better option.

Annuities. These function like savings accounts that pay income to you during your life and into retirement. Pros: Annuities provide retirement income that can be used for everything from rent to travel. They can be set up to pay your loved ones upon your death the same way life insurance would.

Many people don't get life insurance because they believe the process will be inconvenient. After all, you'll have to research your options, fill out a lengthy application, and undergo a medical exam that will require you to take time out of your already busy schedule, right?

Many people simply don't understand the benefits of life insurance or how it works. They may also underestimate the risks and financial consequences of not having adequate coverage.

The above-cited LIMRA study shows that 42% of consumers do not purchase life insurance because of its high cost. Additionally, over half of Americans overestimate the cost of life insurance, believing it to be three times more expensive than it is.

Not everyone needs life insurance. People who've accumulated enough wealth to cover their final expenses and who don't have dependents can usually forgo paying for life insurance.

The Benefits of Using Life Insurance as an Investment

This strategy offers a unique combination of financial protection and growth opportunities that other investments may not provide. Tax Advantages: The cash value in your policy grows tax-deferred, meaning you won't pay taxes on any earnings until you withdraw them.