Life insurance sales see increase during the pandemic
The number of Americans who own life insurance policies remains at a low, but sales are picking up, and an insurance industry survey released Monday indicates families are more interested in buying life insurance.
Life insurance policy sales jumped 14% in January compared with January 2020. Sales increased 12% in February compared with February 2020, according to Limra, a Windsor, Conn.-based trade group for the financial services industry.
Sales numbers for life insurance policies also grew in the second, third and fourth quarters of 2020 as more families choose to purchase life insurance coverage during the COVID-19 pandemic.
Limra researchers found there’s a historical basis for pandemic fears causing families to make life insurance a priority. Based on data from the country’s top three mutual life insurance companies, the number of policies sold, on average, increased 58% in 1919 — the year after the flu pandemic of 1918.
“If you look at life insurance sales, they tend to go up after some type of life event — the birth of a child, getting married or the passing of a loved one,” said David Levenson, president and CEO of Limra. “Surely at a macro level, the pandemic has been a significant life event for many individuals.”
Limra’s Insurance Barometer Study released Monday found 36% of Americans plan to buy life insurance in the next 12 months, which is the highest purchase intent the survey has found in 11 years.
“This is a macro life event that affects everyone,” Mr. Levenson said. “Now everyone is evaluating what would happen to their family if something happened to them. That is a natural way of thinking in the midst of a pandemic, and that’s why we see such demand for life insurance.”
Currently, just 52% of Americans own a life insurance policy outside of their workplace coverage, which Limra says is the lowest level since it started tracking life insurance ownership in 1960.
Even with the increased demand, that still leaves 102 million uninsured and underinsured Americans, representing 40% of the adult population.
The most common reasons people surveyed in the study give for not purchasing life insurance are cost and having other financial priorities.
Just over half ( 53%) aren’t sure what type of life insurance they need or how much coverage to purchase; almost half (47%) stated they have simply put off buying life insurance; and more than a third (36%) don’t believe they would qualify for life insurance coverage.
Forty-four percent of millennials estimated the annual cost of a 20-year term life insurance policy for a 30-year-old was more than $1,000, when it’s actually closer to $165 per year.
The study found many are at risk of putting too much reliance on employer-sponsored life insurance coverage. Men (35%) are more likely to believe the coverage they get from their job is sufficient than women do (22%).
According to the U.S. Bureau of Labor Statistics, the median life insurance coverage offered at the workplace is either a flat sum of $20,000 or one year’s salary.
The latest Barometer study found more than half of U.S. households rely on dual incomes (54%), and for many, losing one income could be financially devastating to the family. It found that 42% of families would face financial hardship in six months and a quarter of families would be in dire straits within a month.
“Having adequate life insurance coverage is the foundation of a secure financial future,” Mr. Levenson said. “A good rule of thumb is consumers should have 10 times their annual salary to ensure their loved ones’ futures are protected.
“But after consulting with a life insurance licensed financial professional, the right amount may be more or less than that depending on their circumstances.”