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Life Insurance: Decision States, Financial Literacy and Personal Values

Hazel Bateman, Paul Gerrans, Susan Thorp and Yunbo Zeng

Abstract: We administered an online survey to elicit consumers’ subjective assessments of their decision state for the purchase of life insurance - from pre-aware to purchase decision - in a setting of both active choice and default cover. We find that household formation and financial assets are associated with higher decision states, but not always with being capable and ready to choose. The financially literate are more likely to be in a higher state, but the less financially literate are spread across several states. We also find that personal values matter for readiness to make a choice about life insurance with respondents who place more value on benevolence and self- determination more likely to be aware of life insurance and capable to choose. We conclude that personal values help consumers choose suitable cover and that interventions to increase cover and improve suitability of life insurance should target progression through the decision states.

Keywords: Life insurance, decision states, personal values, financial literacy, defaults.

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