There was a sharp increase in the number of life insurance policies sold in the first quarter of 2010 when compared with the same time period in 2009. ?And now the second quarter of 2010 has posted another strong increase. ?Compared with the second quarter of 2009, annualized premiums for individual life insurance policies were up 7% in the second quarter of this year.
Whole life, universal life, and variable universal life are all being purchased more this year than last year. ?But term life insurance did not show gains; annualized premiums for term policies dropped 11% in the second quarter of 2010. ?I find this interesting, given that term life insurance tends to be the most appropriate choice for the majority of the population that needs to secure death benefits.
It’s possible that the slowly-rebounding economy is responsible for the shift from term to permanent life insurance products, and for the overall upswing in total annualized premiums. ?For the last couple years, the recession has meant that most of the country has been tightening their budgets. ?Term life insurance policies are a lot less expensive than permanent policies, so for people who needed to buy life insurance during the recession, term products were likely more popular. ?But now that the economy is showing signs of recovering, people may be more apt to purchase higher-cost permanent life insurance policies that grow cash value or include an investment component. ?It will be interesting to see how the numbers play out for the rest of 2010… will term life insurance policy sales bounce back, or will the growth of permanent policies continue?
The first quarter of 2010 has seen an sharp increase in the number of life insurance policies purchased, compared with the first quarter of last year. ?It does make sense that after the economic problems of the last couple years, that people would be more focused on managing risk now than they were before the recession. ?Term life insurance is especially appropriate now for risk-averse clients, as it is an inexpensive way to provide financial security for one’s family, without concerns about stock market volatility.
Certified financial planner Carl Richards had a great article on the New York Times blog last month, about why life insurance shouldn’t be treated as an investment. ?The napkin drawing is chuckle-worthy, but it also makes a really good point: ?for most people, it’s a better idea to keep investing and life insurance as separate entities. ?There are exceptions, such as people who need to generate cash upon their death to pay estate taxes on assets like real estate or a business that they would like to pass to their heirs without selling. ?For situations like that, the financial obligation won’t diminish over time and the life insurance policy needs to be permanent. ?But for most people, the need for life insurance does indeed diminish over time as children finish college and mortgages get paid off and net worth grows. ?For many people, the need for life insurance after retirement is low, as there is no longer an earned income that would need to be replaced.
For people who still have many years of work ahead of them – and many years of financial obligations – now is a great time to look into securing life insurance. ?A term life insurance policy will allow you to lock in the premium based on your current age, and is a great way to protect your family’s financial future without taking financial risks.