Why People Aren’t Buying Life Insurance

Today’s post is a guest post from Ravi Ahuja of MoneyGlare. If you have an interest in guest posting, please see our guest posting guidelines.


Why People Aren't Buying Life InsuranceLet me start by asking you a simple but important question. Have you prepared for yourself a “Must-Have” list? Or, let me put it in another way. Have you prepared a list of what you aspire to achieve in your life? Having a list in place or not, one generally wants many things to achieve in his or her life. Dreams are a part and parcel of our lives, and I am quite sure one of your aspirations would be to have a happy and secured family life. Isn’t it so?

If this is true then why is it so that people do not feature life insurance in their “Priority-List” or “Must-Have List?” Why is it so that people don’t buy life insurance? Life insurance is an instrument that safeguards your family’s financial interests in case something unfortunate happens to you. Life Insurance gives financial security to your family and compensates them with the life cover amount if you are no more.

This is also our topic of discussion for today. Despite being one of the most important financial instrument that provides well-being and financial security to your family, life insurance has still not become popular with the people. People are just not buying life insurance. As a matter of fact nearly 56% of U.S. householders did not possess an individual life insurance policy. An astonishing figure which is an all time high.

So, let us analyse and figure out the top reasons which are contributing to people not buying life insurance. Are they actually not aware of the benefits of life insurance, or is it something that plagues life insurance? Let me list the important reasons to you one by one.


Reasons People Aren’t Buying Life Insurance

1. As you would have also observed, there is a marked decrease in the habit of saving among the people today. People are simply not saving enough for their future well-being. They are spending for food items, apparel, gadgets, vacations, cars, and other sorts of luxury items. However, they are ignoring this important element called “saving”.  When you are not saving regularly, buying life insurance requires you to put aside a good amount of earnings as premiums for a life insurance policy. Yes, without adequate savings, people just cannot think about life insurance.

2. Buying life insurance is considered as a “regular” expense by people. When something is considered as an expense, the attitude is generally to avoid such an expense. As life insurance benefits are not derived while you are paying your premiums and it comes into play after a rather long duration, people consider paying its premiums as an expense. Hence, it has become quite uncommon with the people.

3. Life insurance is considered as an unprofitable investment instrument. Only a part of your premium is invested and the rest goes for paying other charges linked with life insurance. When compared with other pure investment instruments like stocks and mutual funds, life insurance falls short in its aspect of returns. Also, some life insurance plans do not have an investment angle at all – for example, a term life insurance plan.

4. In today’s family structure, both husband and wife are working to earn their living. This has given families a sort of financial freedom. Both are themselves equipped to meet their future needs and aspirations. So, life insurance has slipped from the number one spot as a “must-have” instrument for family security.

5. Another major reason for a large proportion of people not buying life insurance is that they lack trust in the industry as a whole. They are not sure that the money they put aside in life insurance policies would be actually given to their legitimate heirs once they are gone.

So, these are the main reasons why people don’t buy life insurance. Having analyzed the reasons we can now clearly see that life insurance is still important in our lives although many issues circle around it. If we are able to sort and address the above issues, life insurance has the potential to become popular with the people again. Actually, the usefulness and value of life insurance is still important. We cannot ignore having it as life is still uncertain and insecure.

About the Author: Ravi Ahuja is fulltime blogger who write for his blog MoneyGlare.com which focus on saving, investments, insurance and personal finance.


  1. says

    I know for me, Number 5 was the big issue. Not only had I heard so many negative things about Life Insurance, I knew the process would be complicated. And buying anything above Term did prove to be less than straight-forward; even after I had a permanent policy for over 2 years. After I switched back to Term, everything became a lot simpler. Above all, you have to do what you know is necessary and get life insurance to protect your family.

    • says

      For me personally, I think that term is the only way to go. I’ve never even tried to buy whole life, so I guess I don’t have much to add as far as complications with that.

  2. says

    I do buy life insurance through my employer’s insurance plan and it seems like it is relatively affordable and the risk/reward of purchasing it seems to be well worth paying into the plan each month. I don’t have a distrust of the health insurance industry, but I also haven’t spent much time looking into life insurance – like I said I just sign up for the plan and each year and the premiums get taken out of my paycheck.

    • says

      Buying pure life insurance is much cheaper compare to other plan. Insurance should not treated as expenses rather protector for your dependence. Buying health insurance is great idea along with life insurance.

  3. says

    Nice post. I too have found that many lack life insurance coverage. The thing is that it often can be a very reasonable expense to have, especially when you’re younger. True, a term life policy won’t bring you return in an investment sense, but I view it as a way to provide for my family when I pass away. I have other money for investments, but insurance serves a different purpose. Thanks again for the post.

    • says

      I totally agree that life insurance serves a different purpose. Like you, we invest with other money. Since it really shouldn’t be an investment, we buy term. Also, we have a dollar or two a month extra, we have return of premium on ours. That way, we do get the principal back at the end.

  4. says

    I have a basic sum that will be paid to my family if I die by my house insurance, my travel insurance, and my credit card insurance, but don’t have life insurance per se. With no kids it doesn’t really make sense to me, that may change if/when I have them, as of now I prefer a stock portfolio not tied to me dying.

    • says

      That makes sense. However, in the U.S. at least, if you have bills to pay due to an accident/etc. and you die from those injuries, your estate would still be liable for those expenses. That is why life insurance is a nice thing. It is my understanding that it can’t be touched as an asset and can be used to pay for funeral costs, if nothing else.

  5. says

    I think there’s also a big reason #6 – YOU will never get to see the benefit of a life insurance policy you buy for yourself. We’re inherently very selfish beings, and when someone is making a choice about spending to make their life a little more comfortable in the “now” vs buying something you know you’ll never benefit from… well, that influences things.

    That said, we have life insurance through our employers, so it’s a no brainer for us.

  6. Seth says

    I think there is a distrust in that industry. Most agents make their living on selling these policies and if you don’t get the right agent, they might try to sell you a $500,000 policy when all you really need is a $250,000 policy.

    While I also have life insurance through my employer, I also have another policy. If you leave your company, you can’t take company life insurance with you, so I think it’s important to have another policy outside your employer.

    • says

      We have a policy outside of our work that we pay directly for. It is term life for about $17.00 a month. So far, we are pleased with it.

      • Scott says

        Buying term is smart for expenses and dreams that have a term. Term insurance is far from $17 a month when one is 75. The amount of insurance that should be permanent would be for a few things. One, final expenses which can also mean replacement of wealth lost to a long term illness. Loss of social security payments incurred by spouse and loss of pension or investment income. Just sayin

  7. says

    I definitely agree with #5. It can be a very confusing process, without proper knowledge of the industry. Plus, you can never really trust salesmen who are trying to get the biggest commission. It can be scary, you just have to research and know what you want beforehand.

  8. says

    My only deterrent from Term Life was that the money didn’t come back to me. But then I realized neither does my car insurance, or homeowner’s policy. BECAUSE IT IS INSURANCE, NOT AN INVESTMENT. After I realized that, it was a piece of cake :)

    • says

      Very true. Insurance serves a different purpose, at least in my opinion. However, we were able to find a term policy with return of premium for just a few dollars extra a month. We kind of like that.

    • says

      Yes Jacob this is the biggest problem when people expect to get their premium back. But insurance is not your investment it provide financial security.

      Do we get our money back when we appoint security guard for office and if nothing happens do we request our money back from security guard? Same applies for insurance too.

  9. says

    I think life insurance is unpopular because most people don’t anticipate anything happening to them any time soon, thus see expense unnecessary. For example, do you know what you’re getting your husband/wife for Christmas this year? Yes, or no – it doesn’t really matter, the fact is you’re actually thinking about Christmas and have no reason you won’t be around to celebrate it. The most unfortunate of events take place when we least expect them – tomorrow, today, now. We don’t think about that at all, and can’t cope with the thought that life may be over any minute.

    • says

      I think you’re right. People don’t want to think about their own death, much less think that it could happen before they are 175 years old.

  10. says

    As a society in general we tend not to do much in terms of ‘prevention’ especially when it comes to life/health, 95% of our North American healthcare system is at ”fixing” diseases that exist. I work in one of the few fields whose entire goal is to PREVENT disease (dental hygiene) so I know first hand how difficult it is to get someone to invest in something before it turns into an issue. This is also true for life insurance, we don’t invest in something until we HAVE to when we’re faced with health issues.

    • says

      That is another good point. For instance, I really need to get in to the dentist for a cleaning. Unfortunately, I’ve been putting it off because I don’t want to pay for it. I’m hoping that I won’t have any cavities. If I do, it will be my own fault and it will end up costing me more in the long run.

  11. says

    I agree with #5. I don’t want somebody with a product to sell to explain to me the benefits.

    I never had much problem recommending my financial planning clients buy life insurance (or them taking the recommendation, for that matter). If we were talking about disability coverage, that’s when people got a big case of the “not gonna happen to me”‘s….

    Nice guest post!

  12. says

    It all comes down to a hard question though: What do you care when you’re dead? (Nothing… you’re dead).

    If you’re young and single then there is no need for life insurance. Unless you want to bequeath a big chunk of money to somebody or some charity.

    If you have dependents and no assets then you should really have some term life insurance. But if you’re a good investor then the more your nest-egg grows, the less need you will have for insurance. (Provided your nest egg includes a healthy amount of income producing things like dividend payers, REITs, bonds, etc).

    Whole-life insurance is the domain of the rich. If you have a vast estate that you want to protect from taxation then whole-life will let you gradually pay and will eventually help cover the tax burden of moving your estate into the hands of your heirs.

    I have some term life. I will pay it out and let it expire. I will then buy a new term for half as much. (My investment holdings are doing exactly what I want/need them to do). After that, then there should be no need for any more life-insurance since my investments should be completely paying for my family’s fixed expenses. (And then some).

  13. says

    I think people avoid paying life insurance for the same reason they don’t take other precautions like savings for retirement or their emergency fund. They either “A” are in such bad financial shape they don’t want the extra expense, or “B” don’t really think about it as necessary and prefer to take the gamble of doing nothing.

  14. says

    Just came across your blog. Am so glad to see this being addressed. It can be so easy to put this aside, but if you have kids it’s a must do. Had to watch my mother in law struggle for years as her husband passed away very suddenly at only 44 years of age. With their 3 younger boys still at home it was rough on her to return to working life because they hadn’t planned enough insurance to help out.
    We personally reevaluated coverage 6 years ago when we chose to adopt again and would go on to add two more young children to our lives. Have to plan for lifes uncertainties for the sake of our kids. Hope your article makes a difference for your younger followers who can easily put this off as something they’ll get to later.

  15. says

    Buying life insurance for me was a no-brainer and something I didn’t question much at all. There is a definitive need for it and having met with people directly impacted by the loss of a spouse (that didn’t have life insurance) made me even more motivated to get it. Oh…and being that I’m a retirement planner probably helped in the matter. :)

  16. says

    I have never held a life insurance policy before but with our new baby on the way I feel that it is a prudent move to setup life insurance for both me and my wife.

    Once we have paid off the mortgage and any kids that we have are a bit older, then I will probably cancel any life insurance policies.

    I just don’t want my wife to be left behind with the burden of mortgage debt and looking after a family on her own.

  17. Justin says

    I was ignorant when I purchased my first life insurance at 23. It was a $50,000 whole life policy that I was talked into by the agent. I thought I was being responsible. I had no debt and was not married. Huge waste of money.
    As soon as I was married my wife and I both bought policies. I bought my policy for her. If I passed she would not be able to afford our bills on just her income.
    However, my goal is to have enough saved that we won’t need the policies. My opinion is that insurance is for those who could not pay for their living expenses with their current savings.
    If you don’t have anyone relying on your income there is no real reason for life insurance, unless you want to leave them some money.
    I also agree with Suze Orman’s philosophy of young unmarried people without children having enough life insurance to cover any student loans their parents may have co-signed for.

  18. says

    I actually own a life insurance company http://www.truebluelifeinsurance.com and believe that life insurance really should be bought, and not sold. Most people just don’t see the importance of life insurance until they witness the affect not having it can have on a family.
    If you have a family, life insurance is a backup your loved ones cannot live without. But I must say, times are tough right now… so the customer really has to want life insurance for it to not be considered just an additional expense.

  19. says

    When people think about life insurance, it seems that the go-to reaction is one of fear and loathing. People are confused about how to buy, when to buy, and what type of life insurance they should be looking for.
    This confusion occurs because there are a good many myths and misinformation surrounding term life insurance. Many people think that they will be ineligible, or be unable to get reasonable health insurance because of their medical history.
    There are many ways to negotiate life insurance and find a plan that works for you. There are even ways to get term life insurance with no medical exam!

  20. Will says

    Funny how people who don’t know very much about permanent life insurance come up with all kinds of excuses for not owning it. Wealthy people, successful businesses, and banks own tons of it. Maybe the naysayers should hit the books and learn a little something about it.

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