Financial hardship: who's looking out for vulnerable households?
Photo by Jhon David
This article has been written in collaboration with Fred de Jong, based on consumer research among 1,247 Dutch households.
The financial consequences of losing a spouse can be devastating. The surviving partner faces reduced income while housing costs continue. Whether those consequences are manageable depends on several factors. One of them: has the household taken steps to cover the loss of income?
We studied how Dutch households deal with this risk. The findings are troubling.
The numbers
27% of respondents expect to face immediate financial hardship if their partner dies. Another 17% have no idea or haven't thought about it. Together, that's 39% of Dutch households who are vulnerable.
The problems cluster around a specific profile: lower education, income at or below median, renting rather than owning, single parents with financial obligations for children, relying on family and friends for financial matters, focused on day-to-day financial survival.
Among households fitting this profile, 69% have no life insurance.
Renters
The gap between renters and homeowners is striking. Among homeowners, 60% have life insurance. Among renters, it's 31%.
Why don't renters get coverage? The main reason: it doesn't cross their mind. Additionally, 27% assume the premium is too high — when it actually runs around €13 a month.
The financial impact of a partner's death hits renters without insurance the hardest. On average, their disposable income drops by 33%. That's more than their monthly housing costs.
Off the radar
The group facing the highest risk is also the group least likely to interact with financial advisors. Among renters without life insurance, only 14% have spoken with an advisor in the past five years.
Renters who do have insurance purchased it through a broker or bank just 37% of the time. Most buy online or directly from an insurer. They prefer to handle it themselves.
The conversation that never happens
37% of respondents have never discussed the financial consequences of death within their household. Among single parents with children living at home, that number is 61%. Among single parents with adult children who've moved out, it's 75%.
The financially vulnerable are the least likely to think about it. 26% of renters without insurance have never considered how they want to leave their family financially.
Out of reach
The financial services industry focuses on people taking out mortgages. That's where the contact happens. That's where the revenue is.
But the households facing the greatest risk aren't taking out mortgages. They rent. They don't walk into an advisor's office. They assume insurance costs far more than it does. And they don't think about it — until it's too late.
69% of renters have no life insurance. Only 14% have spoken with an advisor in the past five years.
How do you reach people who aren't coming to you?
The question that lingers
This research shows where the damage falls: households that are financially vulnerable, that have no buffer, that don't know what's coming.
The financial services industry has the knowledge, the products, and the infrastructure to make a difference here. The question isn't whether it's possible. The question is whether the industry is willing to look beyond the customers who show up on their own.
What role does your organization want to play for the households you're not seeing?