Americans are choosing life insurance for the wrong reason, survey shows

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Brand familiarity is great, as long as it doesn’t blind you to better options.


Key points

  • The number one reason Americans choose one life insurance company over another is brand perception.
  • There are five things to look for in a life insurance company, including price, customer service, your individual needs, and more.

There are several good reasons to buy life insurance. You may want to make sure your loved ones have a solid financial footing after your death or that a business you own can continue to operate. Whatever your reason for purchasing life insurance, a new survey serves as a reminder why it’s essential to shop around for the one that best suits your needs.

And therein lies the problem. Most people don’t buy.

Read more: How to buy life insurance: step by step guide

Brand perception is driving life insurance decisions

In November, JD Power released its 2021 US Life Insurance New Business Study. Frankly, we were surprised by what the study found: The main reason people choose one life insurance company over another is brand perception.

For 30 years, the number of people who have chosen to buy life insurance has decreased. Today, that appears to be changing, largely due to the 961,000 people who have died of COVID in the United States since 2020. Simply put, life insurance makes sense.

However, when we set out to purchase life insurance, we seem to base our decisions on perception rather than reality. While having life insurance coverage is better than not, it’s not a one-size-fits-all proposition. Just because our parents were insured through one company or our favorite actor appears in a commercial for another, neither company can fully meet our needs.

According to Robert M. Lajdziak, director of global insurance intelligence at JD Power, “Life insurance, unlike other forms of insurance, is a very long-term purchase, and while traditional factors like price are important, brand attribute with the greatest influence on buying is confidence in the long-term viability of the brand.

What if the company that best suits our needs has only been in the market for a few years? Should we automatically buy a policy through another company?

We all want to believe that our life insurance company will exist in 30, 40 or 50 years when we need it. But, as Lajdziak says, “This creates challenges for younger brands or companies that have rebranded and are competing in a market with companies like New York Life, which just celebrated its 175th anniversary.”

The truth is that a company that has been around since the Truman administration may (or may not) be the best one for you. If they’re overpriced, have lousy customer service, or push you into a policy you’ll regret, no matter how long they’ve been in business.

If you’re in the market for insurance, be sure to check with companies you’re familiar with. But while you’re at it, why not check out a few that haven’t been on the market that long? What matters is making sure you find the coverage you need at a price you can afford.

Here is a checklist of five factors to consider when buying:

1. License

Is the insurance company licensed in your state? Buying a policy from a company licensed in your state means you can depend on your state insurance department to help you if there’s ever a problem. Each state has its own Department of Insurance and should have a website that allows you to search for a license.

2. Financial strength

No one wants to spend years paying premiums at an insurance company that is poorly managed or on shaky financial ground. Check with one (or all) of these financial rating agencies to learn more about the financial stability of an insurance company that interests you.

Agency

Website

Phone number

I am better

www.ambest.com

(908) 439-2200

Kroll Bond Rating (KBRA)

kbra.com

(646) 731-2368

Moody’s Investor Services

www.moodys.com

(212) 553-0300

standard and poor

www2.standardandpoors.com

(212) 438-2000

Data source: Author’s research.

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