It has been said that life insurance is a product that is sold, not bought. What that means is that in the vast majority of cases, the agent is the one to first broach the subject. The consumer must be willing to at least listen, but rarely are they the party that initiates action. In other words, they’re not sitting around saying “Gee, I have some discretionary income, I think I’ll spend it on life insurance.” It generally doesn’t work like that.
That makes life insurance different from most other consumer products. Although I don’t sell it, I am professionally affiliated with a gentleman who sells auto and homeowner’s insurance, and people call him all the time for coverage. Why? Because you can’t drive a car (legally) without insurance, and no bank will lend money for a house that isn’t insured.
There are no such requirements for life insurance. You can have ten kids and go uninsured, should you choose. And if you do have ten kids, there are probably enough demands on your time and pocketbook that life insurance can be easily overlooked. That is why the agent will probably be the one to bring it up.
There are several reasons why life insurance must be sold, as opposed to being bought. First and foremost, there is always something we would rather spend our money on; cars, vacations, appliances, all seem to clamor for our dollars over a product that doesn’t even benefit us directly.
Second, many people don’t even think about the need for liquidity that their death would create. It usually takes an agent to point that out. Lastly, even if people are aware of the need, they usually don’t know how to estimate an appropriate amount. I find that most people drastically underestimate the amount of coverage needed. For those reasons, I believe an agent will remain the primary instigator of the life insurance sale.
Can you think of another product that is sold, not bought? The only one I can think of is pre-paid cemetery plots.
Is there any way to position life insurance as a product that people will actually seek out and buy on their own initiative? I doubt it. It deals with a subject that, given the choice, we’d rather avoid.
No matter how many living benefits are attached it, its primary purpose will always be to deliver dollars on death, our death, and contemplating that is usually not on our weekend to-do list. How do I know? I’ve been in the life insurance business since 1983 and I can count on one hand the number of clients who have who approached me to discuss life insurance.
So the next time you receive an unsolicited phone call from a life insurance agent, remember that the reason is that it is a product that is normally sold, not bought.