Life insurance. Two simple words about a complex product that nearly everyone agrees they need, but sometimes have a hard time making the leap and actually buying it.
For advisors, that is both good and bad news. The good news is that if you can find a prospect that is interested in purchasing a life insurance policy, chances are promising you can use your persuasive powers to convince them to do so.
The bad news is, a rough economy has made it a tough sell as people have other priorities for their dollars. Further exacerbating the problem is an incremental thinning in the ranks of life insurance agents, necessitating new channels of distributions and recruitment methods so everyone who wants to buy life insurance can.
For this year’s Essential Guide to Life Insurance, we explore where the industry stands as it relates to the senior market.
They want it,
they need it…
they don’t buy it
According to LIMRA, individual life insurance ownership among those 65 and older has decreased in recent years. In 2004, 51 percent of those past their 65th birthday owned a life insurance policy. Six years later that percentage fell to 41 percent. Why so?
Perhaps it’s because many in that age group are working longer and depending instead on group life insurance, says Robert Kerzner, president and CEO of Windsor, Conn.-based LIMRA, LOMA and LL Global. The numbers tell the story: In 2004, 20 percent held group insurance; in 2010, that percentage rose to 27 percent.
Those statistics, however, may foreshadow a shaky financial situation post-retirement, Kerzner suggests. “Many of them when they retire lose their group insurance, which likely means that the longer-term ownership for those 65 and over will get worse,” he explains. So why aren’t they buying life insurance? Like so much of life after the financial calamity of 2008, their view is shaped by a recession.
A 2010 life insurance ownership study by LIMRA found that consumers’ financial priorities have shifted. Today, they are more concerned about simply making ends meet, saving for retirement, paying down debt or even funding a child’s college education than buying life insurance.
Speaking of debt, LIMRA further uncovered that the average retiree and pre-retiree age 55 to 70 is more than $100,000 in the red. Not the way anyone wants to enter their leisure years, especially when people are living longer; meaning, if one spouse dies, the other faces the very real possibility of running out cash without a life insurance policy.
“They may need the life insurance just to create an infusion of cash at the first death, to get their spouse through retirement,” Kerzner says. “Yet fewer of them have it and yet they need it more than the retiring generation of a decade or two ago.”
However, seniors may be getting the message that they do need life insurance and are buying it: MIB Life Index revealed that while applications for underwritten individual life insurance were down or flat for two age categories (0 through 44 and 44 to 59), it grew by 8.3 percent in the second quarter for those 60 and up.
Emphasizing how much money your clients need in retirement now and in the future and the myriad risks that could cut into those cash reserves are the most persuasive selling points when marketing life insurance products. Topping the list of potential risks is, of course,longevity: People are living longer; therefore, their need more cash to fund a retirement that could last 30 years.