Middle-Market Insureds Keep Their Life Insurance


How’s this for an anomaly? Although a lot of middle-income households are either not insured or underinsured for life insurance, those who do have life insurance tend to keep it.

Consider the data: LIMRA estimates that 44 million U.S. households have no life insurance, and that 35 million middle market households are underinsured. And a Nationwide Financial study found that 98 percent of consumers who are married, partnered or have dependents, lack enough life insurance to replace their income, with the average consumer falling short by about $1.2 million.

Based on findings like those, you’d think that life insurance is anathema to a wide swath of middle income consumers. Yet Eastbridge Consulting Group recently published some figures that suggest that this isn’t necessarily so.

Eastbridge found that life insurance represents the largest share of in-force insurance premiums in the voluntary insurance market. In fact, term life and universal life/whole life (UL/WL) premiums accounted for 47 percent of all in-force voluntary insurance premiums in 2013.

This is based on premiums by product line reported by 47 voluntary carriers, which Eastbridge says collectively represent about 84 percent of the total estimated in-force business for 2013.

Eastbridge follows various types of voluntary insurance products, including disability, dental, accident as well as life and several others. This gives the company a bird’s eye view of what’s hot and what’s not in the employer-sponsored voluntary marketplace, which is a key insurance channel for middle-income consumers.

Apparently, life insurance is a winner in this market. Take term insurance for example. The Eastbridge study found that term accounted for 22 percent of new voluntary insurance sales in 2013. But here’s what’s notable: Term accounted for almost twice that figure (37 percent) when ranked by in-force voluntary insurance premiums. That makes it pretty clear that workers are not only buying voluntary term but many are also keeping it.

Where UL/WL is concerned, the study found a similar trend. UL/WL voluntary products accounted for 7 percent of 2013 sales but 10 percent of in-force premiums. Although the sales/in-force differential here is not as dramatic as that for voluntary term, it does show that older UL/WL policies are still on the books even though they probably cost more.

By comparison, several other voluntary products sag on the in-force side. For example, voluntary accident insurance represented 12 percent of sales in 2013 but only 3 percent of in-force premium. Hospital indemnity/supplemental medical coverage represented 8 percent of sales but only 2 percent of in-force premium. Short-term disability represented 14 percent of sales, a tidy sum, but only 9 percent of in-force premium.

Life insurance has been a top seller in the voluntary market for years, so it’s no surprise to

see term, UL and WL sales lead the pack. But the persistency of the life business in this market is less well known.

This persistency may help explain why some life insurance agents encounter resistance when offering individual life insurance to mid-market households outside of the workplace. If the consumer “already has it from work,” the person many not want more. However, given the vast number of underinsured, a strong argument can be made for voluntary policyholders to buy more.

The significance of the Eastbridge finding is that many workers who buy voluntary life insurance value it enough to continue paying for it. That perceived value should make a solid foundation upon which to build.


Linda Koco, MBA, is a contributing editor to InsuranceNewsNet, specializing in life insurance, annuities and income planning. Connect with Linda →

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