Life Insurance Statistics
Coverage trends that could provide you with even more protection!
Around half of American families would have a difficult time financially if the primary wage earner were to die. Replacing the primary income in a household is just one of the many ways that life insurance can provide a financial safety net that could allow families to continue going forward without having to drastically decrease their standard of living in the event of the unexpected.
When you hear the term โlife insurance,โ you may automatically think of the death benefit that it can provide โ and this is partially correct. But what many people donโt realize is that permanent life insurance can also be a flexible financial tool that can be used in a multitude of other waysโฆmost while the insured is still alive.
There are also some misconceptions about life insurance, such as its cost and qualification criteria โ which can often prevent people from obtaining a valuable tool that could provide a multitude of benefits, to them and those they care about.
It has been shown that the more someone knows about the benefits of life insurance and is knowledgeable about its details, the more likely that person will have coverage. With that in mind, having a good understanding of key life insurance statistics โ as well as about how and where life insurance may fit into your own retirement savings and income plan โ could provide you with an added layer of financial security, both now and in the future.
Do You Really Need Life Insurance?
Life insurance can provide a financial safety net for households and businesses upon the death of a primary wage earner and/or key employee. Being able to count on a guaranteed payout of death benefit funds โ and one that is typically received by the beneficiary(ies) income tax free โ can help immensely with planning for the future. Knowing that funds will arrive relatively quickly upon the death of an insured also means that survivors have one less thing to worry about during an already difficult time in their lives.
As of 2022, roughly half of American adults owned a life insurance policy. This equates to approximately 172 million Americans who have coverage. But there are some age and gender differences amongst these individuals who own life insurance. For instance, 53% of American men own coverage as compared to 46% of women.
Because roughly 44% of people surveyed felt that they would feel a financial burden upon losing a loved one, life insurance can help dependents โ including loved ones and business-related associated โ feel more financially secure.
This all leads to the question, do YOU need life insuranceโฆand the answer to that is, it depends. For instance, it is often thought that young families are the primary users of life insurance because of the dependents who count on financial support from an insured.
However, people of all ages and family statuses may use life insurance proceeds for a wide array of needs, such as:
- Funeral, burial, and other final expenses of the insured
- Paying off debts (such as a home mortgage, auto loans, and/or other financial obligations)
- Continuing to pay day-to-day living expenses (like food, utilities, and household needs)
- Funding future college costs for children or grandchildren
- Replacing retirement income from a lost pension and/or Social Security benefits
- Making a charitable donation
- Keeping a business afloat while a new owner, partner, or key employee is being sought or the company is finding a qualified buyer
- Covering asset transfer and/or estate taxes
- Leaving an inheritance for loved ones
Given that, there are many reasons why you may need life insurance, regardless of your age, income amount, and/or family status. However, just simply having a life insurance policy doesnโt necessarily equate to having adequate coverage. In fact, some estimates posit that over 100 million Americans either don’t have enough coverage or are completely uninsured and this could pose a problem for their survivors in the future.
What Life Insurance Actually Does
As with most other types of insurance and financial tools, life insurance policies are not all exactly the same. Nor do they all offer the same list of potential benefits. But, with so many different variations of life insurance available in the marketplace, these policies can be more easily โcustomizedโ to fit a wide range of planning, income, and protection needs.
Although there are many variations of life insurance policies, there are two primary categories of coverage. These are term life and permanent life.
Term life insurance provides death benefit only coverage, with no cash or investment build-up, whereas permanent life insurance includes a death benefit and a cash or investment component.
The funds in permanent life insurance policies grow on a tax deferred basis โ and many who own permanent life insurance use their policy as an additional avenue of saving and/or investing.
Life insurance is often used in both personal and business planning situations, too. While life insurance policies will pay out a stated amount of proceeds if the insured dies while the policy is in force, some of the other benefits โ depending on the policy โ may allow the following:
- Tax deferred growth of the funds in the policyโs cash value
- Penalty-free access to funds if the insured is diagnosed with a terminal, critical, and/or chronic illness
- Penalty-free access to cash value funds if the insured requires long-term care services (usually for longer than a specified minimum time period)
- Withdrawals (that are taxable) and/or tax-free loans that may be used to pay off higher-interest debt, purchase high-ticket items, and/or to supplement retirement income
For the year 2021, Americans collected nearly $791 billion from life insurance claims and benefits. This is up from the nearly $748 billion that was collected in the year 2020.
Based on your situation, it may be possible that life insurance could solve a whole host of financial needs for you and your loved ones. So, it is important to determine whether or not life insurance belongs in your portfolio โ and if so, how much.
Life Insurance โ Product and Industry Trends in 2023
Life insurance ownership can fluctuate from year to year. As of 2022, though, the following is true regarding who owns coverage:
- 59% of married or partnered Americans compared to just 38% of those who are single
- Older, more financially secure adults are more likely to have coverage (even though there is a need for life insurance across all age and income ranges)
Further, even though life insurance ownership dropped by 2% between 2021 and 2022, roughly 31% of Americans who were surveyed stated that the COVID-19 pandemic has made them more likely to get coverage going forward.
In addition, between 2020 and 2022, life insurance premiums collected from insurers actually increased by approximately $13 billion (or roughly by 9%) in total. So, this indicates that the life insurance industry is on the rise. Source: Annuity.org
Life Insurance Ownership by Age and Household Income (in 2022)
| Age Range: | Percentage Owning Life Insurance: | Annual Household Income: | Percentage Owning Life Insurance: |
|---|---|---|---|
| 18 to 24 | 34% | Under $50,000 | 31% |
| 25 to 44 | 46% | $50,000 to $99,999 | 52% |
| 45 to 64 | 53% | $100,000 or more | 63% |
| 65 and over | 57% |
Life insurance can be purchased by an individual. This type of coverage is also oftentimes offered as part of an employer benefits package at businesses. Some 25% of Americans are presumed to be covered solely from an employee benefit plan, whereas roughly 33% of American adults are covered solely by an individual life insurance policy that is not related to their employer. The statistics regarding life insurance coverage can be further broken down between males and females.
Who has life insurance in the United States (in 2022)?
Source: Forbes AdvisorThe age ranges for life insurance ownership correlate somewhat with the different U.S. โgenerations,โ such as the Baby Boomers, Generation X, Millennials, and Generation Z.
For instance, those who are in the Baby Boomer generation are the most likely to own life insurance, with those in Generation Z being the least likely โ even though many in the latter group need coverage, but do not own a policy.
Life Insurance Ownership and Coverage Need by Generation
| Generation: | Percent that Own Life Insurance: | Percent that Need Life Insurance but Do Not Own It: |
|---|---|---|
| Baby Boomers | 57% | 18% |
| Generation X | 50% | 32% |
| Millennials | 45% | 39% |
| Generation Z | 34% | 44% |
Even though males and females are generally charged different life insurance premium rates (based in large part on their differing life expectancy, with all other factors being equal), their reasons for buying coverage are similar.
For instance, one of the biggest reasons that is cited by both genders for life insurance ownership is to cover the cost of burial and final expenses so that loved ones would not have to dip into other assets or put these costs on high-interest credit cards.
Based on research from the American Council of Life Insurers, life insurance ownership can also vary a great deal across state lines. In 2020, the life insurance purchases (based on face amount of coverage in millions) broke down as follows:
Type of Coverage / Life Insurance Policy
| State | Individual | Group | Credit | Total |
|---|---|---|---|---|
| Alabama | $26,208 | $14,949 | $1,145 | $42,302 |
| Alaska | $4,359 | $2,518 | $4 | $6,881 |
| Arizona | $33,175 | $25,953 | $306 | $59,434 |
| Arkansas | $12,388 | $8,542 | $114 | $21,045 |
| California | $249,746 | $201,412 | $655 | $451,813 |
| Colorado | $39,465 | $18,770 | $156 | $58,390 |
| Connecticut | $24,515 | $31,563 | $58 | $56,135 |
| Delaware | $8,500 | $28,052 | $19 | $36,570 |
| District of Columbia | $5,779 | $18,594 | $28 | $24,401 |
| Florida | $120,981 | $65,816 | $3,272 | $190,069 |
| Georgia | $67,959 | $59,894 | $3,249 | $131,102 |
| Hawaii | $8,756 | $2,800 | $145 | $11,702 |
| Idaho | $8,828 | $3,017 | $148 | $11,994 |
| Illinois | $76,135 | $62,698 | $808 | $139,911 |
| Indiana | $29,416 | $21,337 | $828 | $51,581 |
| Iowa | $18,363 | $8,283 | $324 | $26,970 |
| Kansas | $15,297 | $10,866 | $287 | $26,450 |
| Kentucky | $16,012 | $23,283 | $911 | $40,206 |
| Louisiana | $25,448 | $18,011 | $1,474 | $44,933 |
| Maine | $3,860 | $4,955 | $249 | $9,063 |
| Maryland | $37,047 | $21,833 | $430 | $59,309 |
| Massachusetts | $43,577 | $37,260 | $83 | $80,921 |
| Michigan | $42,058 | $39,990 | $1,049 | $83,097 |
| Minnesota | $35,000 | $27,743 | $217 | $62,960 |
| Mississippi | $15,289 | $6,280 | $1,135 | $22,704 |
| Missouri | $31,599 | $33,057 | $603 | $65,259 |
| Montana | $5,160 | $1,739 | $45 | $6,944 |
| Nebraska | $13,160 | $6,131 | $83 | $19,373 |
| Nevada | $16,606 | $6,721 | $49 | $23,376 |
| New Hampshire | $6,070 | $5,191 | $171 | $11,432 |
| New Jersey | $71,165 | $40,036 | $205 | $111,405 |
| New Mexico | $6,484 | $3,059 | $293 | $9,836 |
| New York | $126,953 | $94,571 | $2,080 | $223,604 |
| North Carolina | $54,541 | $40,692 | $2,348 | $97,581 |
| North Dakota | $5,081 | $2,647 | $164 | $7,892 |
| Ohio | $50,290 | $60,171 | $1,097 | $111,557 |
| Oklahoma | $16,510 | $12,213 | $522 | $29,245 |
| Oregon | $16,646 | $8,156 | $171 | $24,972 |
| Pennsylvania | $60,521 | $60,316 | $1,122 | $121,958 |
| Rhode Island | $4,447 | $2,412 | $4 | $6,864 |
| South Carolina | $26,379 | $15,128 | $2,207 | $43,714 |
| South Dakota | $8,013 | $1,810 | $71 | $9,894 |
| Tennessee | $38,976 | $41,708 | $1,544 | $82,228 |
| Texas | $167,886 | $116,460 | $6,518 | $290,864 |
| Utah | $22,336 | $13,380 | $229 | $35,945 |
| Vermont | $2,415 | $1,500 | $36 | $3,951 |
| Virginia | $44,989 | $35,385 | $580 | $80,954 |
| Washington | $37,278 | $32,218 | $199 | $69,695 |
| West Virginia | $4,453 | $3,617 | $238 | $8,309 |
| Wisconsin | $29,258 | $25,539 | $373 | $55,171 |
| Wyoming | $3,453 | $1,015 | $32 | $4,500 |
| Total U.S. | $1,838,831 | $1,429,559 | $38,077 | $3,306,467 |
Of those who do not have life insurance, there are several reasons why these individuals have not purchased it, such as:
- 31% do not know what kind of life insurance to purchase
- 16% do not believe that they would qualify, based on health condition(s)
- 49% of these individuals also do not feel that they could afford the premium โ although in many cases, (roughly 8 in 10) people) overestimate the cost of life insurance coverage
The good news is that there is a wide range of life insurance coverage and premium prices to choose from. In addition, life insurance policies that offer accelerated underwriting and simplified issue underwriting โ allow Americans to get approved for a policy more quickly and easily, primarily because there is no medical examination required.
| Most common reasons cited for not buying life insurance: | Most common reasons cited for buying life insurance: |
|---|---|
| Cost | Paying for burial and other end-of-life expenses |
| Not a financial priority | Supplementing lost income from the death of a primary wage earner |
| Uncertainty about life insurance / unsure about how much coverage or what type of policy to buy | Transferring wealth from one generation to the next |
With that in mind, there is a definitive positive correlation between life insurance policy owners and financial security. For instance, approximately 68% of those who own life insurance feel financially secure, as compared to just 47% of those who do not own coverage.
The primary reasons people buy life insurance include the following:
- Replacing lost income of a deceased wage earner
- Covering funeral and burial expenses
- Transferring wealth / leaving an inheritance
There are literally thousands of life insurance companies and agencies in the United States. But the top ten largest life insurance companies in the United States make up a significant portion of the market and are responsible for issuing nearly half of all life insurance policies. Many of these companies have been in existence for more than 100 years.
Top 10 Largest Life Insurance Providers in the United States (in 2022)
| Company | Rank | Direct Premiums* (In billions) | Market Share** |
|---|---|---|---|
| Northwestern Mutual Group | 1 | $14.27 | 7.49% |
| New York Life Group | 2 | $13.26 | 6.96% |
| Metropolitan Group | 3 | $11.48 | 6.02% |
| Prudential of America Group | 4 | $10.64 | 5.59% |
| Mass Mutual Life Insurance Group | 5 | $10.07 | 5.29% |
| Lincoln National Group | 6 | $8.30 | 4.36% |
| State Farm Group | 7 | $5.25 | 2.76% |
| John Hancock Group | 8 | $5.04 | 2.65% |
| Aegon U.S. Holding Group | 9 | $4.98 | 2.61% |
| Minnesota Mutual Group | 10 | $4.84 | 2.54% |
*Direct Premiums represent the total amount of money that companies collected in exchange for the life insurance coverage.
**Market share represents the portion of the life insurance industry that is controlled by this provider.
Stock vs Mutual
There are two primary classifications of life insurance companies. These are stock and mutual. Stock insurance companies are owned by their stockholders or shareholders. The primary goal of stock insurers is to generate a profit for these individuals. Shares of stock insurance companies are oftentimes traded in the public market.
Mutual insurance companies are owned by their policy holders, who have a right to vote on the board of the companyโs directors. Further, the assets of mutual insurance companies are held for the benefit and protection of the policy holders. While they are not guaranteed, mutual insurance companies often pay dividends โ considered a return of excess premium โ to qualifying policy owners. These dividends may be taken in cash or used to purchase additional insurance coverage.
In 2022, life insurance companies collected in excess of $810 billion in total premiums, when combined with annuity considerations, deposit-type contract funds, and accident and health considerations.
Based on LIMRAโs research, for the period between 2021 to 2026, the sales of U.S. individual life insurance could increase by approximately 2% per year for fixed rate policies that are aimed at buyers who want to focus primarily on building up cash value.
Likewise, sales of more protection oriented life insurance policies could rise as much as 3% to 4% per year, and roughly 6% per year for life insurance policies that have their cash value totals tied to the performance of the investment markets.
Similar to general life insurance claims, another insurance product โ annuities โ has also been on the rise, with their benefits increasing by more than $6 billion โ or roughly 7% – between 2020 and 2021. Overall, Americans collected more than $92 billion from annuities in 2021. These financial vehicles can also provide a number of enticing guarantees and protections. Source: Annuity.org
Why So Many Investors and Retirees are Turning to Annuities
While life insurance is an extremely flexible and beneficial financial tool, many investors and retirees are turning to another insurance vehicle, as well โ annuities โ and for very good reason.
With many companies now doing away with the traditional defined benefit pension plan โ where a set amount of income is paid out, often for the remainder of the former employeeโs lifetime โ retirees are now having to create their own future income plan. And, one of the best ways to produce your own โpersonal pensionโ is with an annuity.
Annuities are designed for paying out a pre-set amount of income on a regular basis, for either a known time period (like 10 or 20 years), or even for the rest of the recipientโs life โ regardless of how long that may be.
With this guaranteed income โfloor,โ retirees can be more comfortable in knowing that income will continue to arrive, even if the stock market endures a drastic correction and/or if interest rates fall.
Plus, because of this guaranteed income, retirees can also have more options with the remainder of their portfolio, and could even invest these funds into investments that have the opportunity for a higher return, but that also impose more risk.
Using a single premium immediate annuity (SPIA), funds could be โrolled overโ from and IRA (Individual Retirement Account) and/or employer-sponsored retirement plan (like a 401k), and begin generating an income stream right away.
Alternatively, if an individual or couple is not quite ready to start receiving retirement income yet, a deferred annuity can allow for tax deferred growth of the funds in the account. There may be other benefits attached to the annuity, too, such as:
- A death benefit
- Penalty free access to funds if the annuity holder is diagnosed with a terminal, critical, or chronic illness
- Access to funds penalty free if the annuity holder requires long-term care services (usually for a minimum amount of time)
Given the popularity of annuities over the past couple of decades, insurance carriers have developed many different versions of these products. So, it is important that you have a good understanding of how an annuity works โ or whether or not an annuity is even right for you โ before you make a long-term commitment to one. An experienced insurance specialist can assist you with narrowing down the best option for you.
Top 2023 Annuity Trends
According to LIMRA (the Life Insurance Marketing and Research Association), total annuity sales surged to more than $310.6 billion in 2022, which represents an increase of 22% over 2021 figures โ and that is 17% higher than the previous sales record that was set back in 2008 (when many investors sought the security that is provided by annuities during the Great Recession). It is projected that total U.S. annuity sales could increase again in 2023.
One of the key reasons that is driving these massive annuity sales is investors and retirees who are seeking guaranteed growth and income, along with downside market protection โ which they can obtain with both fixed and fixed indexed annuities. This has been a primary driver in the 2022 fixed annuity sales of $208 billion, a 49% increase over sales of these annuities in 2019.
With a regular fixed annuity, the offering insurance company typically sets the rate of return โ which is oftentimes in line with other โsafeโ financial vehicles like bonds and CDs. In return for this somewhat lower rate, though, is the principal protection that is maintained in any type of market or economic environment.
Fixed Indexed Annuities
Fixed indexed annuities โ which are a type of fixed annuity โ have their return based primarily on the performance of one or more underlying market indexes, such as the S&P 500. In contract periods when the index(es) performs well, a gain is credited to the annuity, oftentimes up to a pre-set level, or โcap.โ
However, in periods when the underlying index(es) performs poorly and it incurs a negative return, there is no loss credited to the annuity. Rather, a guaranteed โfloorโ rate is still received โ which is generally in the range of 0% to 2% (in 2023). Therefore, with no losses to make up for, the annuityโs account value can continue to grow and build upon its previous gains going forward.
With that in mind, fixed indexed annuity sales also had a record fourth quarter and year in 2022. Here, FIA sales were just under $22 billion in the fourth quarter of 2022, an increase of 32% over the prior yearโs fourth quarter sales. Overall, in 2022, fixed indexed annuity sales were up 25% from 2021, to nearly $79.5 billion.
Todayโs uncertain economic and market environment can make it an ideal time to consider including a fixed indexed annuity in your portfolio, as these financial vehicles allow the opportunity for a higher return than many other fixed investments, while also keeping principal protected. In addition, no other investment can offer guaranteed lifetime income for an unlimited amount of time without interest rate, market, and reinvestments risk.
2022 Annuity Sales Highlights
| Total annuity sales reach $310.6 billion - topping the previous record that was set in 2008 |
| $208 billion in fixed annuity sales surpasses the record set in 2019 by 49% |
| 2022 had record-breaking sales for fixed-rate deferred, fixed indexed, and registered index-linked annuities (RILAs) |
Looking ahead for fixed and fixed indexed annuities, growth is likely to continue, given the volatile stock market and fluctuating interest rates, as people continue to seek balance between growth, protection, and guaranteed retirement income.
Further, as interest rates have been rising from their previous historic lows, fixed annuities in particular may become even more attractive to people, both before and during retirement.
Variable Annuities
On the other hand, the market for variable annuities could become smaller in the future. Variable annuities base their return on the performance of one or more underlying equities, like mutual funds.
While many variable annuities allow for unlimited upside returns, there is also the risk of loss with these vehicles โ including a reduction in the principal contributions โ if the tracked investment(s) incurs a loss in a given time period.
Therefore, it is estimated that through 2026, the sales for annuity products that do not offer significant guarantees could fall as much as 5% per year, whereas those that do provide such guarantees could continue to rise by an average of 6% to 7% per year.
In addition to the uncertain market and economic outlook, some of the other key drivers of increased fixed and fixed annuity sales include the following:
- Inflation
- Technology implementation
- Regulatory environment
- Aging of the U.S. population
For instance, the aging of the population in the United States is creating a very favorable environment for sales of individual annuities โ many of which have clustered around the โtraditionalโ retirement age of 65.
Part of this is due to the massive unemployment that was spurred by the COVID-19 pandemic, where many Americans who were nearing retirement altered their initial plans and ended up retiring earlier than they had anticipated.
Registered Index Linked Annuity
Another annuity version, the registered index linked annuity, or RILA, also saw its sales increase to nearly $41 billion in 2022, which represents a 6% increase over 2021, as well as an all-time high for this particular product lineโs sales. This is due in large part to more investors and retirees looking for safety.
An RILA is another type of annuity that uses a stock market index to determine its return. But what sets registered index-linked annuities apart from other types of annuities is the ability for the investor to set the maximum amount of loss they are willing to take. Any of the losses that are beneath that specified โfloorโ are absorbed by the insurance company.
Therefore, if you choose a downside floor of 10%, and the underlying index on your RILA annuity falls 15% in a given contract year, your loss will be limited to just 10%. In return for this limited downside, or โbuffer,โ the upward potential is limited, or capped, to that same extent when the underlying market goes up.
In the above example, then, your gains would also be โcappedโ at 10% in that particular time period. Therefore, RILAs can be somewhat flexible in that they may be โcustomizedโ to meet different investorsโ objectives.
Because most annuities can come with a myriad of โmoving parts,โ it is recommended that you discuss your overall short- and long-term financial needs and goals with an insurance specialist who can answer any questions that you have, as well as go out into the marketplace and find the right products and tools for your particular situation.
Are You Looking for More Protection and Stability in Your Portfolio?
Life insurance and annuities can provide you โ and those you care about โ with peace of mind, both now and in the future. This is why most good solid portfolios should include one or both of these financial vehicles, given the protection and safety that they can provide.
Does your portfolio need additional stability?
If so, talking with an insurance specialist at Insurance and Estates can help.
At Insurance and Estates, our primary focus is on matching our clients with the right financial safety net, while also allowing them the flexibility to deal with lifeโs โ and the economyโs – unexpected twists and turns.
We work with many of the top insurance and annuity carriers in the U.S. in order to better ensure your financial stability, both now and in the future. We also place a key emphasis on educating our clients so that you know what you have in your portfolio, along with why it is/was recommended, and what you can anticipate going forward from it. This also includes performing regular reviews, and making any adjustments where necessary, based on various changes in your life and/or your goals, as well as the market and economy.
So, if you would like to determine whether or not you have the right type and amount of life insurance coverage and annuities โ or if you do not have any life insurance or annuities at all, but you feel the need for this type of protection โ we invite you to contact the specialists at Insurance and Estates or sending us an email with any questions that you may have. We look forward to helping you determine whether or not life insurance and annuities have a place in your planning and portfolio.
Sources
Life Insurance Statistics and Industry Trends to Know in 2023. By Savannah Hanson. November 21, 2022. Annuity.org. https://www.annuity.org/life-insurance/statistics/#
Life Insurance Statistics, Data and Industry Trends 2023. By Chauncey Crail. January 2, 2023. Forbes Advisor. https://www.forbes.com/advisor/life-insurance/life-insurance-statistics/
The 2023 Life, Health and Annuity Prediction Almanac. By Allison Bell. January 3, 2023. ThinkAdvisor. https://www.thinkadvisor.com/2023/01/03/the-2023-life-health-and-annuity-prediction-almanac/#
LIMRA: 2022 U.S. Retail Annuity Sales Shatter Annual Sales Records Set in 2008. LIMRA. January 26, 2023. https://www.limra.com/en/newsroom/news-releases/2023/limra-2022-u.s.-retail-annuity-sales-shatter-annual-sales-records-set-in-2008/#
LIMRA Predicts Steady Growth in Annuity Sales as Number of Retirees Expands. LIMRA. June 23, 2022. https://www.limra.com/en/newsroom/industry-trends/2022/limra-predicts-steady-growth-in-annuity-sales-as-number-of-retirees-expands/
