The economic downturn has affected the life insurance industry, just as it has other sectors of the economy. LIMRA International, a professional development organization for the insurance industry, reported that new annualized premiums (the payments made for individual life insurance policies) were down 11 percent in the third quarter of 2008.
LIMRA's study also pointed out that the steepest decline in premiums was for variable life and variable universal life products, which have values pegged to various equity market investments. Considering the current state of the equity markets, it's not too surprising that the premiums for these types of policies have declined.
And another sign of the downturn in the industry was reported by MIB, a different insurance industry association. In its MIB Life Index, a 4.3 percent decline in overall fourth quarter activity for new individually underwritten life insurance was noted, with a decline of 8.9 percent in December alone, compared to the prior year.
Two Interesting Growth Spots
Though overall life insurance applications were down, the MIB study observed that the number of applications for life insurance for those aged 60+ increased by 5.2 percent, and LIMRA reported that sales of whole life policies were up by 7 percent for the last quarter of 2008.
What Might This Mean to You?
With the retirement savings of many individuals drastically reduced, and those in the 60+ age group having less time to rebuild their savings than younger workers, life insurance may now be seen as a valuable way to provide for loved ones. The increase in sales of whole life policies, which provide coverage for an individual for as long as he or she lives, with set premium payments, may be viewed as the best way to meet the need.
Think You Have Enough Life Insurance to Meet Your Financial Goals?
You might want to think again. A Life insurance Gap survey conducted by Greenwald & Associates showed that, for many individuals, the amount of life insurance they have compared to the amount they would need upon the sudden death of the family breadwinner may be much larger than they thought.
The survey of 1,003 Americans age 25 and over with dependents revealed a 49 percent difference in the amount of money they thought needed to be replaced by their life insurance--for paying off expenses such as college and retirement--and the amount of insurance they actually had.
Have you reviewed your life insurance coverage recently? Without your family's breadwinner or breadwinners' income, how much of your needs would be replaced by their life insurance coverage? And don't forget to take into account what it might cost to pay for everything a stay-at-home parent provides if they were no longer living.
Worried About the Safety of Your Insurance Company?
With the recent downturn in the markets and the failure of many financial services firms, you may have cause to wonder if your insurance company can meet its obligations. Two companies, The Hartford and Lincoln National, have now been approved by the Office of Thrift Supervision to become thrift holding companies. This means they are now eligible to apply for government bailout money.
In a related development, the insurance industry, which is state- rather than federal-regulated, may be subject to new rules and regulations. Howard Mills, former New York State Insurance Superintendent, stated: "I think there is near certainty that you are going to have some federal involvement in the future." What this will mean to the industry is unknown at the present time.
Sanford Ellowitz is a New York State licensed insurance agent. He is also a Certified Financial Planner and a Certified Employee Benefit Specialist. He has over 25 years experience in the insurance and financial services industries. His experience includes financial analysis, product development and marketing. He provides insurance planning and product sales.
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