Achieving life insurance success with middle-income Americans

By Ayo Mseka

The 2024 Insurance Barometer Study by LIMRA and Life Happens recently revealed that middle-income Americans, those with annual household incomes of $50,000 to $149,999, represent the largest market opportunity for the financial-services industry. Two financial professionals recently shared how they have managed to achieve success in selling life insurance to this important segment of the U.S. population.

The life insurance coverage gap

According to the study, four out of 10 middle-income Americans, or 50 million adults, acknowledge that they live with a life insurance coverage gap and expressed a greater intent to buy life insurance (54%) than the general population. “Engaging the middle market continues to be a high priority for life insurers. These households are more likely to own life insurance (55%) and more likely to recognize the important role life insurance plays in their family’s financial security,” said John Carroll, senior vice president, head of Life & Annuities, LIMRA and LOMA. “Yet, like other consumers, they have little understanding about what and how much life insurance they should buy, or how much it actually costs. This leads to indecision and inaction.”

Reasons for not buying

Many agents and advisors who have been asking consumers to buy life insurance know the number one reason they give for not buying it or not buying more of it: It is too expensive. Yet, since the first annual study was conducted in 2011, consumers have consistently overestimated the cost of life insurance, the survey said. The most recent study shows that about three-quarters (72%) of Americans overestimate the true cost of a basic term life insurance policy, and younger Americans are likely to think it is three times its actual cost.

The life insurance coverage gap seen with middle-income Americans is also seen in women, who, according to the study, were less likely than men (46% vs. 57%) to report that they own life insurance. This 11-point difference is the largest it has ever been over the 14 years of the study. This is not due to a lack of awareness about their need for life insurance. For example, the study pointed out that 45 percent of women, or 54 million women, say they live with a coverage gap, and more than a third (36%) and nearly half of younger women say that they plan to purchase life insurance this year.

Moving these individuals from intent to action will require the industry to show how affordable and accessible life insurance can be, while demonstrating how life insurance can address many of their financial concerns, the study said. These concerns include having enough money saved for retirement, building an emergency fund, protecting dependents from financial hardship or from the burden of paying for final expenses.

“Year after year, our studies suggest consumers recognize the value of life insurance and — since the pandemic — more people have expressed greater interest in getting coverage,” noted Carroll. “Our industry needs to continue its efforts to leverage digital tools and platforms to make it easier for people to learn about and buy life insurance so they can achieve financial security for themselves and their loved ones.”

Finding success in the middle

So, what steps are financial professionals taking to find success with middle-income Americans?

Conduct review meetings: “As our retirement plan team conducts review meetings with plan participants in the workplace, we discuss the importance of life insurance planning if the working or non-working spouse were to die young, and we show the value of life insurance planning beyond what may be available to them in the workplace,” said David Appel, with Appel Insurance Advisors, LLC.

Needs analysis: “We share simple, easy to understand life insurance needs analysis to help single individuals or couples understand the basic reasons behind having a certain amount of life insurance, whether it's to be sure a dependent or spouse would need an additional income stream to help with monthly expenses or debt, whether we want to make sure a child can go to school whether a parent is present or not, whether there are parents or others dependent on that individual for income needs, or they just want to clean a debt up on a mortgage or another loan obligation.”

Focus on those overlooked: “Sometimes middle-income consumers are overlooked in the marketplace, but their needs are just as relevant as others, sometimes even more so,” added Jake Cole, a retirement relationship consultant with Sapers & Wallack, a strategic partner firm that works collaboratively with Appel Insurance Advisors. “As others are relying on them to be present for their livelihood, we need to make sure their dependents are going to be OK, whether they are here or not.”

Custom plans: In addition, Appel said that his firm shares with their prospects and clients different types of life insurance plans, or a combination of them, depending on their overall life insurance need, as well as their budget and personal situation. “It's much more important to have the right (correct) amount of life insurance, as the beneficiaries won't care what type of coverage it was,” he added.

Focus on life stage: Appel and Cole have also built a proprietary bell curve that shows the diverse needs of life insurance throughout someone's lifetime, which can help a client frame what they want to protect at different stages of their lives. And they use storytelling with their clients, as well, making sure that they share real life stories they can relate to.

Plan for emerging couples: In addition, Appel said that his firm, together with Sapers & Wallack, works with many emerging couples as they embark on buying their first home, first cars, having a first child, and doing financial planning for the first time. “It is very important to us to make sure they have the proper amount of life and disability insurance in place as a foundation for their overall financial plan,” Appel said.

In January 2024, LIMRA and Life Happens surveyed nearly 5,000 adult consumers who are financial decision makers in their households. For additional findings from the 2024 Insurance Barometer Study, visit the Barometer Research Page and the Securing the Future Infographic.

Ayo Mseka has more than 30 years of experience reporting on the financial services industry. She formerly served as editor-in-chief of NAIFA’s Advisor Today magazine. Contact her at [email protected].