Life’s Persistent Questions #3: What Makes Life Insurance Special?
By: Eric Sondergeld
9/14/2023
Perhaps this is not one of life’s persistent questions, but certainly one the industry should frequently remind consumers of its answer. September 2023 marks the 20th year of Life Insurance Awareness Month (LIAM). I think it is fitting to share some thoughts on what makes life insurance not only special, but entirely unique among other types of insurance.
Life insurance is the only insurance where the insured or policyholder is not the claimant or beneficiary and where that claimant or beneficiary is known at the time of purchase.
With the exception of pet insurance, can you think of another example? When you buy auto insurance, homeowners’ or renters’ insurance, health insurance, or disability insurance, when something goes wrong with your car, your home, or your body, you get that problem addressed and submit an insurance claim. The insurance company then pays you or another party on your behalf (e.g., healthcare provider, contractor, auto mechanic, etc.). These types of insurance don’t need to have named beneficiaries because the insured receives the policy benefits. Only life insurance requires this determination up front.
Life insurance purchase is not driven by a singular event.
If you buy a car, you can’t legally drive it without insurance. If you buy it from a dealer, they won’t give you the keys until they or you secure an insurance card. Similarly, when you buy a home and need to finance the purchase, the mortgage company wants proof that you will protect their investment with insurance. They will usually insist on escrowing for insurance (and taxes) to make sure you keep that insurance. Getting a job typically results in electing or purchasing health insurance. Yes, many employers provide for some basic level of life insurance automatically, but the worker isn’t signing up or paying for it themselves.
In the first blog in this series, When is the Best Time to Buy Life Insurance?, I demonstrated that these and other life events (getting married, starting a family, etc.) impact whether you need life insurance and how much coverage makes sense. However, unlike many other types of insurance, there is no singular point in time that beckons for, let alone requires, someone to purchase life insurance.
Life insurance is the only kind of insurance that guarantees to cover you for your entire life.
Auto and home insurance are 6- or 12-month policies. My auto insurance company just shortened its policy terms to 6 months from annual renewals. Health insurance is typically renewed each year. Disability income insurance offers coverage during one’s working years, often until age 65. Long-term care insurance comes close but is typically purchased a bit later in life.
However, there are life policies that can start when you’re born and last throughout your entire life. Even term life insurance, sometimes described as temporary, lasts between 10 and 30 years.
Life insurance is purchased out of love.
Most special of all is that we don’t buy life insurance for ourselves, we buy it to protect those we love, to help them remain financially secure when we’re no longer here to provide for them. Product purchases are typically either rational or emotional, but purchasing life insurance can be both. Love is often proclaimed as the strongest, most powerful emotion. Many life insurance companies in Asia develop television ads that tug hard on viewers’ heart strings. This is less common in the U.S., where ads and company websites tend to emphasize the rational reasons for buying life insurance. Given that a person’s rational need lacks a specific trigger for when to buy life insurance, adding an emotional component can help convince more consumers that the time to buy is now.
If you’re interested in testing the addition of emotional messaging in your life insurance marketing, contact us.
