As the economy continues to stagnate an interesting trend is developing in the purchase of permanent life insurance products. While term life insurance is considerably cheaper, middle class consumers are showing a growing interest in managing financial risk through the use of permanent life insurance products, according to a new survey. This trend has been born out in the August survey of the First Command Financial Behaviors Index as detailed in this article: Permanent vs. Term insurance popularity
Survey results:
The survey "reveals that 39 percent of middle-class Americans own some form of permanent life insurance coverage." In additional good news for life insurance agents the study by First Command indicates that "among those who don't own a permanent life policy, one in four say they are likely to purchase this type of coverage in the future."
"After years of following the popular pitch to 'buy term and invest the difference,' consumers are now seeing how a market downturn can threaten a seemingly sound financial strategy," said Scott Spiker, CEO of First Command Financial Services, Inc. Among permanent life insurance products here is the breakdown of the current market:
- Whole life is most popular- owned by 26 percent of middle class families.
- Universal life is owned by 10 percent
- Variable life is owned by 4 percent
Term Life is still most popular life product
Term life insurance remains the go-to product for many consumers. Term policies are owned by 45 percent of middle-class families. But very telling is the finding in the survey that, "people who own term life policies feel less comfortable with their coverage than those who own whole life and other permanent products.
Now here's the remarkable factoid from the survey results:
The survey reveals just a 5-point gap between those who feel "extremely" or "very" comfortable with their permanent life insurance coverage (49 percent) and those who feel the same way about their term life insurance coverage (44 percent). Also, consumer satisfaction levels are highest for whole life (60 percent), followed by term (55 percent), universal life (53 percent) and variable life (50 percent). Unfortunately, the First Command survey reveals that 31 percent of middle-class Americans have no life insurance coverage. Too many families are putting too much at risk.
Commentary:
The article does not delve into what I perceive as a key consideration in this trend. The economic downturn has hurt middle class retirement savings markedly and in some cases wiped them out. See this article for more details on America's retirement savings shortfall, currently estimated to be a $6 trillion gap.
So, are Americans realizing that permanent life insurance can be an investment tool as it gains cash value unlike term insurance? Are consumers willing to pay that extra premium for increase piece of mind and the better internal financial comfort level noted above?
Calling all agents:
What do you think of this trend? What are you seeing and hearing? Let's discuss....
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