Who Are Today's Life Insurance Buyers?

Although the “average” individual life insurance buyer may not change dramatically from year-to-year, there are many influences that affect who is buying, what they are buying and how much they are buying.

Current influences include the purchaser’s stage of life, product introductions (such as return of premium term and secondary guarantee universal life) and investors’ renewed and increased interest in life settlements.

All of these made an interesting impact on buyer demographics in 2005. What trends emerged?

Male/female buyers: The majority of individual life sold in a given year is sold to men. In 2005, males purchased 54% of the life policies sold to adults (a number that has not changed significantly since 2003). Men also purchase larger sized individual life insurance policies than women. Both genders increased their average policy size by approximately 25%, but coverage amount for women is still 40% lower than average coverage purchased by adult males.

Still, women may be catching up. With the exception of buyers over age 64, coverage amounts for adult women of younger age groups are consistently closer to the amounts purchased by their male counterparts.

A contributing factor is the increased amount of women in the workforce. In fact, in 2005 there were 1.4 million more women working in the United States than in 2003. In addition, women in older age groups increased their average coverage at a higher rate than did their male counterparts.

Seniors: Seniors are a group that has generated a lot of interest over the last few years in terms of the life settlement market and guaranteed death benefit UL products, both of which are targeted at this age group. While it is too soon to see the impact of life settlements on buyer demographics, there are some changes in the senior market that should be noted:

o While seniors purchased only 11% of total individual life policies sold in 2005, more than 20% of policyholders purchasing ULs were 55 or older (up from 12% in 2003). Furthermore, these older buyers accounted for two-thirds of single premium ULs sold in 2005. Policyholders likely have additional cash available to them at this age as they often make higher incomes, have paid off debt and are no longer likely to be raising children.

o Seniors, a group inclined to reduce financial risks, are also more likely to purchase ULs with long-term secondary death benefit guarantees. In fact, over 33% of those buying guaranteed ULs were over age 54, compared to less than 20% for other types of UL.

o About one-third of life policies bought by consumers age 65+ and one-quarter of sales in the age 55-64 market were whole life. The WLs tend to be significantly smaller than ULs that seniors buy. In fact, on average, over 50% of older adults buying WL had an average policy size of $10,000 or less (likely final expense coverage).