Australians buy life insurance with the heart, and income insurance with the head

July 15th, 2010

Australians use a different decision-making process when buying life insurance, compared to that used to buy income protection insurance, recent research reveals.

Findings from a survey of 1000 Australians conducted by lifebroker early in 2010 show that emotions play a greater role in the purchase of life insurance, than it does in the purchase of income insurance.

Mr Chris Eade, managing director of lifebroker, said the most common reason that research respondents provided for buying life insurance (which was cited by 32 per cent of all respondents who owned life insurance), was ‘to protect their children’.

This contrasted with the most common reason research respondents provided for buying income insurance (cited by 22 per cent of respondents who owned income insurance), which was ‘to protect my income and security’.

Mr Eade said that buyers of life insurance are motivated by an emotional fear of death and the impact this will have on their family, while buyers of income insurance are motivated by a practical concern for maintaining their lifestyle should they stop working because of an injury or illness.

Mr Eade also said the emotional aspect to the buying of life insurance manifest in other characteristics.

“People who buy life insurance are more likely to buy it directly from an insurer in response to online, phone or mail advertising.

“They are also less likely to compare life insurance quotes from other insurers and are less likely to review their level of cover annualy than people who buy income insurance.

Mr Eade said people who buy income insurance often tended to be self-employed workers who are looking for a practical solution to real day-to-day financial risk.

“Self-employed people are more acutely aware of the risks of not working, while employed people are more likely to have a false sense of security due to holiday and sick leave entitlements.

“As a consequence, people who buy income insurance tend to shop around more, and review their policies more often.

Mr Eade said buyers of life insurance have something to learn from the approach used by buyers of income insurance.

“People who only buy life insurance would do well to take more time in their decision-making process.

“Some life insurers also exploit the emotive factor and lure young parents with direct offers for insurance that are, on comparison, much more expensive.

“I recommend everyone who is buying life or income insurance shop around first, review the cost of their policy and the level of insurance annually, and read all their policy documents before signing up.