A life insurance policy is a long-term, complicated financial contract with terms and features that many consumers find difficult to evaluate, covering an event that most do not want to contemplate. We designed and administered an online survey to collect data on consumer decision states relating to purchases of life insurance, in a setting of both choice and default arrangements. We examined personal values and personal characteristics including financial literacy as predictors of consumer decision states. Our analysis of a sample of 1,709 working Australians aged 18-54 years put 28% in a “Pre-Aware” state, 27% “Aware but not interested”, 6% “Interested but not capable,” and 38% “Capable” of deciding whether to purchase or not. Financial knowledge (literacy) is associated with being in higher decision states, as is financial experience or expertise. Attitudes and personal values are also relevant to decision states suggesting that approaches to move people towards a capable state need to account for both knowledge and underlying motivation.

Keywords: Life insurance, financial literacy, decision states, personal values
JEL Codes: G22, G53, G41, A13, D14, G10, G19

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