Forwardfinancialplanning Blog

The wrong people own life insurance January 22, 2012

There are a lot of things in life that don’t make sense.  Often, one would expect a certain pattern to prevail, when in reality, things are exactly the opposite.  A recent study by the Aite Group entitled “The Elusive Life Insurance Purchaser” identifies one of those anomalies. 

Aite conducted an on-line survey of 1,024 consumers.  Thirty seven percent of the respondents reported having no life insurance while five percent were unsure (….now there’s a group that could benefit from financial planning!!).  Only two age groups reported ownership rates at or above 50 percent —-65 to 69 year olds at 50% and aged 75+ at 62%. 

When considering that the most common and logical reason to own life insurance is to protect those who depend on one’s income, this is surprising .  Clearly, people who have young children should constitute what the marketing world refers to as “the heavy user segment” for life insurance.  Yet, obviously this is not the case.  

And, why such a high rate of ownership in the 75+ segment?  While it’s true that some life insurance is appropriately held by this age group to provide liquidity for handling estate taxes, this is a tiny fraction of the total.  How many families are depending on the regular income of a septegenarian??

Some things in life just don’t make sense!!!