In the evolving landscape of the insurance industry, middle-income Americans—those with annual household incomes ranging from $50,000 to $149,999—are emerging as a pivotal market segment for life insurance providers. The 2024 Insurance Baro meter Study conducted by LIMRA and Life Happens underscores the immense potential within this group, highlighting it as the largest opportunity for the financial services industry, particularly in life insurance. Two seasoned financial professionals recently shared their insights on how they’ve successfully navigated the challenges and opportunities in selling life insurance to this critical demographic.
The Life Insurance Coverage Gap
According to the study, a significant portion of middle-income Americans—four out of 10, translating to 50 million adults—acknowledge that they live with a substantial life insurance coverage gap. These individuals expressed a greater intention to purchase life insurance (54%) than the general population. John Carroll, Senior Vice President, Head of Life & Annuities at LIMRA and LOMA, emphasized the ongoing importance of engaging this market, noting, "Engaging the middle market continues to be a high priority for life insurers. These households are more likely to own life insurance (55%) and more likely to recognize the critical role life insurance plays in their family’s financial security."
However, despite this recognition, there remains a widespread lack of understanding about the types and amounts of life insurance needed, as well as the actual costs involved. This lack of knowledge often leads to indecision and inaction, leaving many middle-income Americans without adequate life insurance coverage.
Barriers to Life Insurance Purchase
For many middle-income Americans, the perceived cost of life insurance is the primary deterrent. Financial advisors and insurance agents frequently encounter the belief that life insurance is prohibitively expensive. Yet, since the inception of the annual study in 2011, it has consistently shown that consumers greatly overestimate the cost of life insurance. The latest findings reveal that approximately 72% of Americans overestimate the true cost of a basic term life insurance policy, with younger individuals often believing it costs three times more than it actually does.
This misperception contributes to the life insurance coverage gap, particularly among middle-income women. The study found that women are less likely than men (46% vs. 57%) to report owning life insurance, representing the largest gender gap in the study's 14-year history. Despite this, awareness of the need for life insurance among women remains high, with 45%—equating to 54 million women—acknowledging that they live with a coverage gap. Furthermore, more than a third (36%) and nearly half of younger women plan to purchase life insurance this year.
The challenge for the insurance industry is to convert this intent into action. Doing so requires clearly demonstrating how life insurance is both affordable and accessible, and how it can address a variety of financial concerns that are top-of-mind for middle-income Americans. These concerns include saving for retirement, building an emergency fund, and protecting dependents from financial hardship or the burden of final expenses.
"Year after year, our studies suggest that consumers recognize the value of life insurance, and—since the pandemic—there has been a heightened interest in obtaining coverage," said Carroll. "Our industry must continue to leverage digital tools and platforms to make it easier for people to learn about and purchase life insurance, thereby achieving financial security for themselves and their loved ones."
Strategies for Success in the Middle-Income Market
To successfully sell life insurance to middle-income Americans, financial professionals are employing a range of strategies tailored to this demographic's unique needs and concerns.
Conduct Review Meetings
David Appel of Appel Insurance Advisors, LLC, emphasizes the importance of conducting regular review meetings with clients. "As our retirement plan team conducts review meetings with plan participants in the workplace, we discuss the importance of life insurance planning, particularly if the working or non-working spouse were to die young," Appel explains. "We highlight the value of life insurance planning beyond what may be available through workplace benefits."
Simplified Needs Analysis
Appel also advocates for using simple, easy-to-understand life insurance needs analyses to help individuals or couples grasp the fundamental reasons for having adequate life insurance. Whether it’s ensuring a dependent or spouse has a sufficient income stream, securing a child's educational future, or covering mortgage debt, a clear needs analysis can make the benefits of life insurance more tangible.
Focusing on Overlooked Middle-Income Consumers
Jake Cole, a retirement relationship consultant with Sapers & Wallack, a strategic partner firm working with Appel Insurance Advisors, notes that middle-income consumers are sometimes overlooked in the marketplace. "Their needs are just as relevant as those of higher-income individuals, sometimes even more so," says Cole. "As others rely on them for their livelihood, it's essential to ensure their dependents are protected, whether they're here or not."
Customizing Life Insurance Plans
Appel's firm also emphasizes the importance of customizing life insurance plans to fit the specific needs and budgets of their clients. "We share different types of life insurance plans or combinations of them, depending on the overall life insurance need, budget, and personal situation," Appel explains. "It’s crucial to have the correct amount of life insurance, as the beneficiaries won't care about the type of coverage—it’s the amount that matters."
Life Stage Consideration
Appel and Cole have developed a proprietary bell curve that outlines the varying life insurance needs at different stages of a person’s life. This tool helps clients frame their life insurance decisions based on what they want to protect as they progress through different life stages. Additionally, they use real-life stories to make the importance of life insurance more relatable to their clients.
Planning for Emerging Couples
Another key focus area for Appel and his team is working with emerging couples—those embarking on significant life milestones such as buying their first home, purchasing their first cars, having a first child, and starting financial planning. "It’s vital to ensure these couples have the proper amount of life and disability insurance in place as the foundation of their overall financial plan," Appel notes.
Conclusion
The middle-income market represents a vast and largely untapped opportunity for the life insurance industry. By addressing the misconceptions about cost, providing clear and personalized guidance, and demonstrating the essential role that life insurance plays in financial security, insurance professionals can successfully engage this critical demographic. As the insurance industry continues to evolve, those who effectively meet the needs of middle-income Americans will be well-positioned for long-term success.
