Middle-Income Market Underinsured

While most people think of the poor as not having adequate insurance, there is now growing awareness of a lack of life insurance among middle-income Americans. Of course, “underinsured” is not the same as “uninsured”, but in the event of a catastrophe, that distinction could mean the difference between poverty and a comfortable living for the family members who are left behind.

For many, the issue is that life insurance has no foreseeable benefit, while other types of insurance and services will visibly pay off. Unfortunately, without life insurance to protect savings, 529 plans, retirement vehicles, and debt, going without life insurance is often a fatal mistake.

Bankers have a distinct interest in selling life insurance policies to their customers. Because a customer’s funds are deposited at their bank, the bankers have a better chance of understanding the customer’s financial situation, and many bankers provide financial planning and advising services on top of traditional services. Essentially, a banker wants more business from a household, and many customers value the convenience of having their money and insurance policies all in one place.

The middle-income market is defined as anyone with a household income of $50,000 to $70,000 per year. Nearly two-thirds of America falls under this category, so it’s a major market and an excellent source of additional revenue for the banks that recognize it. For consumers, it is probably a good idea to shop around before settling on the bank that you are already doing business with. Even if the bank is the best one around for holding your money, that doesn’t mean it is your best deal for insurance or other financial services.

However, you might not be aware that many, if not most, banks have quality life-insurance licensed agents ready to help you. Because bankers can meet their customers in person, there is the advantage of a personal relationship. In fact, if many of the underinsured would try establishing a personal relationship with some life insurance agents, they might find one who is willing to negotiate the price in order to gain a customer (or keep a customer happy, if that customer also happens to have some funds at the bank).

It’s important not to underestimate the value of a personal relationship with anyone who provides a financial service. The best way for them to help is if they know you well enough to understand your unique financial circumstances. If you’ve only ever talked to your insurance agents on the phone or through email, then that personal benefit is lost.

While you should never purchase a financial service or insurance policy without first doing some shopping around, you might see some benefits if you focused on developing some relationships with community bankers or agents. Make sure that any community bank life insurance policy contains an integration of the life insurance with the rest of the bank’s product offerings.

If you want to really ensure that it’s a good program, see if they have a good compensation program that encourages their licensed agents, and a referral and marketing program to keep attracting new customers. If you can find a good policy, you can avoid being one of the many underinsured Americans.