Expressing a strong desire to be financially secure as soon as possible, insurance policy buyers under the age of 40 are choosing whole life over other asset alternatives and paying off their policies early, according to a national survey released Tuesday by Guardian Life Insurance Co. of America.
The Guardian survey revealed that a significant number of these Millenial and Gen X policy holders are opting to pay for their policies quickly, often over 10 years or less. Of those surveyed by Guardian, 35% of whole life purchasers under 40 said they wanted to pay off their premiums as quickly as possible, rather than using the more traditional approach of paying over a lifetime.
“This finding underscores a pronounced desire among Millenials and Gen Xers for financial security at an early age,” said Michael Ferik, Guardian’s senior vice president of individual life, at the New York-based insurer’s second annual Whole Life Forum in Manhattan, according to a prepared statement.
The survey, conducted in August by the Melior Group, Philadelphia, involved 242 whole life policy holders. The sample included 155 non-customers and was supplemented by interviews with 87 Guardian customers. A total of 109 whole life owners under the age of 40 and 133 over the age of 40 participated in the survey online and by telephone.
At the forum, Ferik said that the median age for whole life annual sales is 37. Noting that he is 38, Ferik described himself as a "prototypical" whole life buyer, saying he bought a policy because he lost money in the stock market in 2009 and rethought his personal finances when his son was born. He purchased a whole life plan in April 2009.
"This felt like a safe investment," he said, adding that the perception of whole life insurance has changed more than the product itself. "Mindsets today are more conservative and forward-thinking."
At Guardian, purchases of “limited pay” policies, which can be paid up over a shorter term, were up 152% as of June 30, compared with the same period in 2009. Given their reliance on social networks and multimedia information sources, younger buyers of life insurance spent more time researching the purchase and discussing it with family and friends than older buyers did. For example, 58% of under-40s talked to family and friends versus 26% of those over 40, and 46% did online research versus 31%.
Spurred by an increase in Guardian whole life purchases by younger buyers in recent years, the survey revealed that 74% of insurance buyers under the age of 40 are motivated by the desire for financial security “as soon as possible,” and 76% express a desire to be debt-free as soon as possible. These figures contrast with 68% of those over 40 who seek financial security as soon as possible and 69% of over 40s who believe it’s important to be debt-free as soon as possible.
“Perhaps due to the historically high college loan burden carried by today’s graduates, this appreciation of financial security and desire to be debt-free reflect a sea change in attitude from the ‘live for today’ ethos Boomers were known for,” Ferik said.
Founded in 1860, Guardian and its subsidiaries sell life, long-term care insurance, disability income, medical, and dental insurance products to individuals, business owners, and their employees. The company also offers 401(k), annuities and other financial products and trust services. As of December 31, 2009, Guardian had $42.7 billion in assets.
Read about a MetLife study of Gen Y’s debt woes from the archives of AdvisorOne.com.