Ownership of cash value life insurance is on a downward trajectory among the affluent. And a key reason why is the declining need for life insurance to pay for estate taxes.
This is a key finding of a new Conning report, “High Industry Affluent and High Net Worth Strategies: Focus on Investments, not Protection.” The study explores market opportunities and challenges for insurers targeting affluent investors (individuals with $100,000 to $999,999 of financial assets) and the high net worth (those with $1,000,000-plus in assets).
The report reveals that ownership of cash value life insurance among the top 10 percent of U.S. households (as measured by net worth) fell to 34 percent in 2013 from 61 percent in 1989. The research attributes the decline to periodic increase in estate tax exemptions (to $5 million in 2013 from $625,000 in 1989), indicating that paying estate taxes motivated purchases of life insurance for many among the affluent.
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“First, these markets contain a significant number of U.S. households. Second, those households control the majority of U.S. household financial wealth. Third, affluent and high net worth investors have a greater need for financial services, along with the ability to pay for them.”