What Do Consumers Value When Buying Life Insurance?

April 2025

The life insurance landscape is rapidly evolving with shifting consumer demographics, technological developments driving how carriers interact with consumers, and changing economic conditions. Consumers are facing the pressures of inflation and competing financial demands, with many likely feeling a need to focus on the certainty of today rather than the uncertainty of tomorrow. In this environment, life insurance carriers can best develop and maintain a competitive advantage by focusing on providing products that cater to diverse consumers and provide greater value for their dollars.

What do consumers value most when choosing a life insurance product? LIMRA recently conducted a study of 2,015 consumers that simulated real-world buying behavior by forcing respondents to make trade-offs between different product options. Participants were given a series of product “menus” varying in terms of annual cost, face amount, application/underwriting method (a proxy for ease of process), consumer star-rating (a proxy for brand reputation), and personal recommendation. Personal recommendation was included as a means of assessing the importance of having a trusted advisor to help consumers feel they are making decisions that are “right for them.”

The "Ideal" Product

Overall, the results suggest the “ideal” product is offered by a 5-star company, at a “preferred” pricing level, through a simplified underwriting process, providing $100K of coverage, and  accompanied by a recommendation from a financial advisor. However, some product attributes are more important than others, and preferences vary with market segments, indicating that different consumers are willing to make different trade-offs to obtain their “ideal” product.

Most Important Attributes

A product attribute’s importance was assessed by the extent to which an attribute value dominates preference share. Preference share is the percentage of consumers choosing a given product from a set of products. The attribute demonstrating the largest difference in preference share garnered by the most and least preferred attribute values can be considered the most important to consumers.

Consistent with consumer perceptions, annual cost is most important in driving product preferences — 47 percent of consumers select the lowest priced option while only 10 percent select the highest priced option, for a difference of 37 percentage points — the largest difference for any attribute (Table 1).

However, consumer star-rating comes in a close second, with products offered by 5-star companies garnering a preference share only slightly smaller (43 percent) than that of the lowest-priced products (47 percent). Only 11 percent of consumers favor products offered by a 2.5-star company. Notably, products offered by 5-star companies show a 13-percentage point advantage over those offered by 4.5-star companies, indicating that even already highly regarded companies can significantly increase their market share by further improving their customers’ experience.

Application/underwriting method lags, but is still an important driver of consumer decisions, with products offered through simplified underwriting garnering the largest preference share (35 percent). Despite its higher price tag, this method is preferred over products offered through full underwriting (25 percent), indicating consumers value ease of process and are willing to pay a premium for it. The observed difference between simplified and simplified/accelerated methods suggests consumers may have concerns about insurance companies accessing third-party data needed to support accelerated underwriting. Guaranteed issue is least likely to be preferred (11 percent), likely due to its much higher price tag.

Personal recommendations and face amount appear to be the least important of the product attributes examined. Products recommended by a financial advisor are preferred by 7 percentage points over products with no personal recommendation but are only slightly more favored than those recommended by a close friend/family member or insurance agent.

It is not surprising that there is no one face amount that clearly dominates consumer preferences as appropriate coverage levels depend on personal situations. Face amount appears most important to consumers with a household income of $250K or more (33 percent prefer $1M of coverage), between $35K and $49.9K (31 percent prefer $50K of coverage, likely partly reflecting perceived affordability), or with the highest scores on a life insurance knowledge quiz (33 percent prefer $1M of coverage).

Action Plans

Survey findings point insurance carriers toward a number of effective strategies. Among these are:

Focus on providing an exceptional customer experience with an eye to catering to diverse market segments by enhancing technology and data analytic capabilities. Look beyond transactional interactions to focus on the long-term relationship in which the insurer is a trusted advisor, providing personalized services and products, and helping consumers make decisions that are right for them. Connecting consumers with a financial advisor could also increase confidence in the process from research to purchase. Brand reputation is only slightly less important than price to consumers.

Meet consumers where they currently are and evolve your relationship with them as circumstances change. Face amount is most important to those consumers in the highest and lowest household income bands examined. Those with income between $35K and $49.9K strongly prefer $50K of coverage. These consumers may feel a need for life insurance but have budgets that are already stretched thin. Listen to their needs and concerns, and consider resisting high pressure tactics to sell higher face amounts. After all, some protection is better than none. Additionally, a positive shift in economic situation could invite reconsideration of coverage levels later. Consumers should not feel that life insurance is only for the affluent.

Reduce product complexity by increasing transparency. Market segment variations can be used to target educational campaigns toward consumers who may not adequately understand coverage level recommendations, including those in middle household income segments. This study also found that consumers with greater product literacy are less sensitive to pricing.

Simplify the application process. Boost your simplified and accelerated underwriting programs — consumers are willing to pay a premium for ease of process. Accelerated underwriting is only slightly less preferred, likely due to consumer concerns about the use of third-party data but has greater potential for cost savings by minimizing mortality slippage through use of predictive algorithms. At the same time, be transparent about how third-party data is used — many consumers likely do not understand how data such as motor vehicle records or credit history are relevant to life insurance purchases. Transparency increases both understanding and trust.

Consumers, then, consider many factors when choosing a life insurance policy. These run the gamut from face amount to the carrier’s reputation. Forward-thinking insurers will take all these factors into account when recommending products to them.

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