A high percentage of Americans don’t know much about life insurance. In a recent test, LIMRA gave 4,000 people a life insurance IQ test to gauge their knowledge and understanding of life insurance. Only 1,200 passed the 10-question exam and the majority, or 55 percent, answered fewer than five questions correctly.
“In addition to identifying the aspects of life insurance that consumers understand and where consumers admit to being in the dark, the study also shed light on some widespread misperceptions,” said Jennifer Douglas, LIMRA associate research director for strategic and developmental research.
“With life insurance ownership at an all-time low, it is important that the industry not only overcome consumers’ lack of knowledge about life insurance but address the misinformation that is out there confusing them and possibly having a negative impact on their image of the industry.”
Respondents who knew the most about life insurance cited multiple sources of information that attributed to their understanding of life insurance, owned life insurance, heard about it through work, a seminar or financial planner. Most were older, more educated and viewed life insurance as important.
Less than 1 percent of those surveyed answered all ten questions correctly.
“One of the top reasons consumers give about why they don’t buy life insurance is because it is ‘too confusing,’” said Douglas. “The study shows that consumers with a better understanding of life insurance have a higher level of confidence in insurance companies than those less knowledgeable about life insurance. The study offers companies an in-depth view on what consumers know and the factors that contribute to better understanding of life insurance, helping them take the right steps to increase Americans’ comfort level with the industry and its products.”
LIMRA, a worldwide research, consulting and professional development organization, helps more than 850 insurance and financial services companies in 73 countries increase their marketing and distribution effectiveness.