Life insurance is about living

It’s natural to not want to think about things going wrong, let alone spend money to protect us from it. Ignorance is bliss, after all. So it’s unsurprising that people don’t take out insurance they might seriously need in the future.

Here, we examine 5 psychological barriers to taking out financial protection and why they might not be as solid as you might think

It’s not often we wake up in the morning and feel excited about buying life insurance.

The truth is most of us see it as a grudge purchase. After all, we’d rather not think about things going wrong – particularly when it comes to matters of life and death.

This is especially true for young people. A recent survey revealed that 28% of 18 to 40 years olds had never even thought about life insurance1.

More than half said they had no cover at all – an estimated 10 million in the UK – which raises the question: what would happen financially if they were unable to work due to illness or injury, or worse?

Here, we take a look at some of the reasons why people would rather not take out insurance. Spoiler alert! It’s got much to do with our cognitive and behavioural biases.

of 18 - 40 years olds have never even thought about life insurance1

1 It won’t happen to me

As human beings, we tend to be over-confident when it comes to certain situations. For example, 96% of drivers consider themselves better than average on the road2 (which is statistically impossible). Behavioural economists call this ‘optimism bias’.

This mentality especially applies to how we frame our health (and our chances of serious illness or death).

At Vitality, we see this first-hand within our member data. This shows us that, when asked, almost half of our members rate their own health as ‘good’ in an online Health Profile, despite having four or more lifestyle risk factors, such as smoking or obesity3.

While a degree of optimism is no bad thing, it’s perhaps not surprising people would rather not take out insurance for something they do not think they will need. But given that statistically one in two people will be diagnosed with cancer during their lifetime4 and more than one-third need to take more than one week off work, with 11% needing to take longer5, having a safety net in the form of Serious Illness Cover or Income Protection is probably more worthwhile than we may like to think.

2 I’d rather spend money on something else

Good things come to those who wait – but it’s not a mantra we as humans tend to live by.

Our propensity towards instant gratification and enjoying rewards in the here and now can hold us back from taking out insurance as we are less likely to wait to reap the benefits in the long term; even if the pay-off is better.

Ever snoozed your alarm, knowing that the extra 10 minutes in bed is going to make you late for work? You get the picture.

Known among experts as ‘present bias’, this especially applies to life insurance, which – in its traditional sense – is something you’d rather not ever have to use.

It’s a big reason why nearly one third of couples prioritise Netflix subscriptions and gym memberships over life insurance.

These days, however, financial protection offers far more than ‘peace of mind’ – through the Vitality Programme, our members can get rewards for being active. This immediate value means ‘present bias’ is no longer a problem.

During 2023, Vitality members received a total of £82m worth of value through Vitality partners, such as Caffè Nero food and handcrafted drinks, Waitrose & Partners food with the Good Health logo, Vue and ODEON cinema tickets, as well as access to health screens and discounts on wearable technology, plus much more6.

2 I’d rather spend money on something else

Good things come to those who wait – but it’s not a mantra we as humans tend to live by.

Our propensity towards instant gratification and enjoying rewards in the here and now can hold us back from taking out insurance as we are less likely to wait to reap the benefits in the long term; even if the pay-off is better.

Ever snoozed your alarm, knowing that the extra 10 minutes in bed is going to make you late for work? You get the picture.

Known among experts as ‘present bias’, this especially applies to life insurance, which – in its traditional sense – is something you’d rather not ever have to use.

It’s a big reason why nearly a third of couples prioritise Netflix subscriptions and gym memberships over life insurance.

These days, however, financial protection offers far more than ‘peace of mind’ – through the Vitality Programme, our members can get rewards for being active. This immediate value means ‘present bias’ is no longer a problem.

During 2023, Vitality members received a total of £82m worth of value through Vitality partners, such as Caffè Nero food and handcrafted drinks, Waitrose & Partners food with the Good Health logo, Vue and ODEON cinema tickets, as well as access to health screens and discounts on wearable technology, plus much more6.

3 My parents or family will look after me

The ‘Bank of Mum and Dad’ is a well-known expression that refers to parents assisting their children onto the housing ladder.

It’s also on the rise, with 37% of first-time buyers in the UK getting help with their deposits last year, compared with 27% the previous year7.

Given its prevalence, it’s often assumed that the same support would be available to replace income lost due to illness or injury.

However, it’s unlikely to last forever and could make a substantial dent in that much-needed housing deposit – or other forms of future savings and investments – later down the line.

Especially considering that an average Income Protection claim is worth more than £17,0008; having the right financial protection in place would help avoid this.

4 I’ve got sick pay at work

The expectation that your employer will look after you if you are unable to work is not unreasonable.

Though there is a risk that you might get far less financial support than you actually need.

Sick pay can vary from business to business and, according to a recent survey, almost half of UK businesses do not provide anything beyond the minimum state benefit of Statutory Sick Pay (SSP)9.

At £116.75 per week and only paid for up to 28 weeks, SSP is unlikely to be sufficient for many people.

Even when a company offers ‘enhanced’ sick pay over and above SSP, there’s often no knowing when that might run out, which is where Income Protection can help. This type of cover gives you a tax-free monthly income if you are unable to work due to illness or injury.

5 Insurers don’t pay out

‘Even if you do need it, there’s no point in taking it out because insurers don’t pay out anyway… right?’

Well, actually, wrong.

Looking at Vitality’s results for Serious Illness Cover, Income Protection and Life Cover last year alone, just under 95% of all claims were paid overall – totalling £117 million10.

Around £446m worth of claims have been paid for life insurance related plans over the past five years, debunking the myth that life insurers don’t pay out.

Quite the opposite, in fact.

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