Frontiers in Management and Business

This study investigates the relationship between financial literacy and the choice of life insurance policies in the multi-racial context of the United States. Both subjective and objective measures of financial literacy are considered important factors in shaping consumer behavior in the life insurance market. Methods: Logistic regression analyses were conducted using data from the 2022 Survey of Consumer Finance to explore how financial literacy is related to the ownership of different types of life insurance, including term insurance, cash value insurance, and a combination of both. The analysis controlled for demographic variables such as age, race, and marital status. Results: The results show that subjective financial literacy significantly influences the ownership of all types of life insurance, while objective financial literacy only affects ownership of term insurance. Demographic factors, such as belonging to Generation X, or being married, also have a positive impact on life insurance ownership. Higher levels of education and income are associated with a higher likelihood of owning life insurance, while unemployment has a negative impact. Conclusion: The findings highlight the central role of subjective financial literacy in motivating individuals to purchase life insurance. Confidence in one's financial knowledge appears to be more influential than actual knowledge when making insurance decisions. Therefore, financial education programs should aim to improve both financial knowledge and confidence to encourage wider adoption of life insurance, ensuring greater financial security for diverse populations.