Why Do People Buy Insurance?

Wealth to Come
Wealth to Come (Photo credit: 크리쓰)

I just read a post from Copyblogger,  “Why Your Marketing Is Missing The Mark.”  It reminded me of the old salesperson proverb,
“Sell the sizzle and not the steak.”

People seldom are interested in the details of insurance policies.  The reason people by insurance is because it meets their needs.  Below are some of the reasons why people buy insurance.


Most, if not every, financial planner will advise people to set up a “Rainy Day” fund.  The difference is in their philosophy.  The more aggressive ones will recommend that you have 3 months worth of safe, liquid income in savings.  The more conservative ones will say you need to have 6 months or more income in that fund.

Everything I read say that over 70% of Americans live from paycheck to paycheck.  The typical American retires with less than $70,000 to supplement their Social Security retirement income.  That means that the majority of Americans would not be able to financially deal with a major illness or injury.

People buy Major Medical, Medicare Supplement and Long Term Care insurance because they want to know that if they need medical help in the future, there will be a way to pay for it.

People buy Disability Income or Critical Illness insurance because they want to know that if a serious injury or illness were to prevent them from earning a paycheck, there would still be enough money to support the life-style that they and their loved ones have come to enjoy.


Some Americans have been able to save some money back.  The good news is that they are able to accept a little more risk.  They can save money by selecting plans with higher deductibles, co-insurance and longer elimination periods.

They still buy insurance for very expensive injuries and illnesses, however, by being willing to pay for more routine medical treatment out of their savings, they pay less in insurance premiums.


A few Americans are fortunate enough to have sizable portfolios.  Some of them inherited their fortunes.  Some of them have worked hard for them.  In spite of the attempt by politicians and the press to paint them all as scum, each one of them is like every other American.  They have common interests with their social group but they are still individuals.  They have their unique likes and dislikes.

There are 2 things that I have noticed that is common with those who are wealthy.  First, they tend to down-play their wealth.  Except for on TV, I have never met a wealthy individual who flaunts the fact that they have more assets than me.  Typically, they are down-to-earth people.

Second, I have never met a wealthy person who liked the idea of wasting money.  They buy insurance for a different reason.  They want to know that if they get sick or injured, someone other than them is going to pay for their medical care.

The wealthy are typically not interested in Disability Income or Critical Illness insurance except for business disposal reasons.  However, they do tend to be more interested in Major Medical and Long Term Care insurance.

The Insurance Barn works primarily with Baby Boomers who have little to no savings.  The insurance products we sell will guarantee that they are able to pay their medical and personal bills so that they are able to keep their standard of living in the event of a serious illness or accident.  If you are not certain if you can say that, let me know in the contact form on the right.  I will look over your portfolio and let you know if your current plans will do that for you.


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