A new LIMRA study shows consumers under age 40 would prefer to receive life insurance benefits as a monthly income rather than a lump sum payment.
In a study on life insurance product designs, 4 in 10 consumers under age 40 prefer a monthly income benefit while approximately 30 percent favor a lump sum payment.
“People buy life insurance for income replacement, but most often the benefit is paid as a lump sum,” said Scott Kallenbach, research director, LIMRA Strategic Research. “Our research suggests that products offering monthly income would have strong appeal among younger and middle class consumers and could be a way to more effectively reach them.”
The 2016 Insurance Barometer found 61 percent of all consumers own life insurance to replace lost income, and 44 percent said they own life insurance to supplement retirement income. These percentages increase among millennials and Gen X consumers.
Because life insurance is a long-term proposition and life situations can change over time, researchers also asked consumers about their interest in policies that can be adjusted to fit different life phases.
“People often buy coverage that fits their needs at the time of purchase,” said Kallenbach. “But as children age, debt obligations fluctuate and income levels change, a death benefit that was once sufficient could become outdated in only a few years.”
When consumers were asked about a policy that could change with their needs, 7 in 10 expressed interest with one third “very” or “extremely interested” in these flexible products. Among those most interested, more than half (52 percent) have children and 51 percent already have some life insurance coverage but believe they are underinsured.
“Product design innovations like these may eventually help the industry grow in markets that have proved difficult in the past,” said Kallenbach.
See the chart on the next page comparing young consumers’ interest in the income versus lump benefit of life insurance.