Taking out a life insurance policy is much like delayed gratification. No one really wakes up in the morning and thinks “Wow, I think I’m going to buy life insurance today!” Thoughts like these are usually reserved for purchases that would make us happy, such as a vacation, a new car, or any other items and experiences. In a sense, life insurance is delaying a reward; we put the money we would have used to grant us immediate happiness into something that would serve us many years later.
To illustrate how this works, consider the marshmallow experiment by Stanford Psychologist Walter Mischel. In this test, they present 90 children with a marshmallow and two options: They can eat one right away or they could wait 15 minutes without eating the first one and get a second marshmallow. It’s supposedly a test of willpower; a signal of future success in school and business.
Life insurance works the same way. It asks you to forego another expense and use the funds to cover what we currently have so that we aren’t left up a creek without a paddle when an emergency strikes. It’s the same as retirement savings, or a rainy day fund except, a bit more focused towards helping your dependents.
Of course, this is just preaching to the choir. In reality, delayed gratification is a lot more difficult to practice, and this isn’t just due to our nature as human beings to seek out the things that would make us happy. Socio-economic conditions and psychological stress are important factors to consider in getting people to seek out a policy.
Even the famed marshmallow example above had its detractors. Melissa Sturge-Apple, a professor of Psychology at the University of Rochester says “When children are faced with economic uncertainty, impoverished conditions, not knowing when the next meal is, etc. - they may be better off if they take what is in front of them.” People were not delaying their rewards and future gains out of impulsiveness. They were carefully considering the fact that they may not get a second chance. There might be food on their plate today, and they may even be promised more in the future, should they wait. However, they do not believe this is guaranteed. Promises can be broken after all.
Going back to life insurance, a person under less ideal socio-economic conditions wouldn’t want to spend what little they have on something that may not give immediate returns. Instead of shelling out for a policy, they may buy new boots to help with their daily walk, or perhaps a new phone to make their work more efficient. We can’t exactly call those impulsive purchases either.
Life insurance providers need to consider the nuances in how people make decisions; and yes, many providers are catching on and starting to tailor their policies to reach a wider demographic. For those under less than ideal financial circumstances, flexible terms, and budget options do exist.
Trying to gauge psychological stress is a bit harder. It’s no surprise that people’s mental states greatly influence how they make purchases. If you are already stressed out, you may not appreciate the hassle of trying to make sense of jargon or clicking through several pages just to find the right deal.
Sometimes, making a simple adjustment such as making the whole research and checkout process simpler and more efficient can yield better results. At glimp, we have compiled all the life insurance policies into one place for easier comparison. After all, why waste time browsing through several websites when you can see them all in just one place? Maybe, by getting people started on a less-stressful note, we can encourage more people to consider taking out a policy to act as their safety net.
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