The Life Insurance Myth: Why Americans aren’t buying life insurance

In order to get more people to buy life insurance, the industry must overcome a lack of consumer education about the product as well as the myth or perception that coverage is too expensive.

The 2025 Insurance Barometer Study, conducted by LIMRA and Life Happens, focuses on the opportunities to educate consumers on the benefits and strengths of life insurance. This year’s study found that a minority of consumers believe they are very knowledgeable or extremely knowledgeable about life insurance, with the percentage varying by age group.

Overall, 41% of Americans said they are only somewhat or not at all knowledgeable about life insurance.

Steve Wood, LIMRA research director, consumer markets, told InsuranceNewsNet the theme of the 2025 barometer study centered on how well consumers understand life insurance and how the industry can educate them about the various products available. That theme had two parts: How to understand the consumer mindset about life insurance and whether consumers understand the value of the product.

Two ways to look at consumer understanding

“We looked at it in a couple of different ways,” he said. “One was looking at younger consumers; in particular, those who would most likely be in the market for life insurance now – 25 to 35 years old – and asking them how much they think an average term policy would cost. We found they overestimated the cost eight to 12 times over what it would cost them.”

Digging deeper into the study, Wood said, researchers asked consumers whether they understood life insurance and what the product can do.

“What we found is that fewer young adults understand what life insurance is,” he said. “Some of the reasons are purely hypotheses on my part, but we know there’s a lot of competition not only for wallet share but for attention. We looked at where people are getting their information. And no surprise, more and more younger adults are getting financial information from social media and other platforms, whether it’s TikTok, Instagram or podcasts.”

Wood cautioned about consumers obtaining financial and insurance information from influencers on social media.

“These are unlicensed individuals. They’re charismatic, they’re attractive to listen to but they have no oversight. They don’t have branding and legal and compliance. It’s also really hard for the industry to get their message out in a few seconds or whatever brief time they have to capture the attention of someone who might be interested in life insurance.”

The industry is responsible for informing consumers about life insurance

The industry must do a better job of informing consumers what life insurance can do for them and what sets it apart from financial tools such as cryptocurrency, Roth IRAs and stocks, he said. One way is for the industry to counter the misinformation on social media by conducting its own information campaigns on various platforms. Simplicity and an emphasis on storytelling also can go a long way in getting consumers to understand the value of life products.

“We know people say they want life insurance but now the question is, how can we get them into that shopping pipelines to better understand it, what it can do for them and their families and why it’s a better value when they buy it at a time when they’re young and healthy.”

The way to increase the number of life insurance policies in force is to make consumers understand the product and how much coverage actually costs, Wood said. Licensed agents are the key to educating the public, he said.

“We still need financial professionals to help people purchase life insurance,” he said. “People still recognize the need for human assistance, the human touch that builds trust.”

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Susan Rupe is managing editor for InsuranceNewsNet. She formerly served as communications director for an insurance agents' association and was an award-winning newspaper reporter and editor. Contact her at [email protected].