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Variable Universal Life Sales Roar Higher

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What You Need to Know

  • In-person meetings with agents and brokers drove permanent life sales higher.
  • VUL buyers were hungrier for accumulation-oriented policies than in protection-oriented policies.
  • Sales growth for term life and fixed universal life was up slightly.

A lull in the COVID-19 pandemic helped U.S. life insurers increase sales of individual life coverage in the second quarter.

Total annualized premium revenue from new retail sales was 21% higher in the second quarter than in the second quarter of 2020, according to new insurer survey results from LIMRA.

The total number of policies sold increased 7% between the second quarter of 2020 and the latest quarter, and the total face amount of the coverage sold rose 7%.

The second-quarter numbers are the best quarterly figures LIMRA has recorded for the individual life market since 1987.

Consumers were especially eager to buy variable universal life (VUL) insurance — a product that can help the holder accumulate assets inside a permanent life insurance wrapper.

VUL policies account for only 10% of premiums from new U.S. individual life sales, but, in the second quarter, annualized premiums from new VUL policy sales were up 69%, year-over-year.

Consumers often need help from an agent or broker to buy permanent life insurance, including VUL policies and whole life policies. A pandemic-related shift away from in-person meetings hurt sales of permanent life products in the second quarter of 2020. The availability of COVID-19 vaccines and a drop in new COVID-19 cases helped bring back in-person meetings and revive sales of permanent life products.

Policy Counts

Here’s what happened to new annualized premiums from the sale of certain types of policies between the second quarter of 2020 and the latest quarter:

  • Variable Universal Life: Up 69%
  • Whole Life: Up 25%
  • Indexed Universal Life: Up 20%
  • Term Life: Up 8%
  • Fixed Universal Life: Up 7%

The Survey

LIMRA is a Windsor, Connecticut-based financial services research organization. It conducts the quarterly life sales surveys mainly to serve needs of members, who get detailed results.

The survey summaries offered to the public indicate how much sales have changed, year-over-year. The summaries do not give the actual sales figures.

VUL Buyers’ Motives

Consumers can use VUL policies in two ways.

  • Buyers who want to maximize death benefit protection can choose policies designed to minimize the premiums and maximize the death benefits.
  • Buyers who want to use the policies to save for retirement, pay for college for their children or support other long-term goals typically buy policies that maximize the premiums, minimize the death benefits and maximize the build up of policy cash value.

Sales of protection-focused VUL policies grew 27% in the second quarter, year-over-year, and sales of accumulation-focused VUL policies climbed 144%, according to LIMRA.

The boom in sales of protection-focused VUL policies may be due partly to a life insurance definition update included in the Consolidated Appropriations Act, 2021.

The provision lowered the minimum interest rate a life insurer can build into an arrangement that the Internal Revenue Services will treat as a life insurance policy. The change has made it easier for accumulation-focused life insurance users to maximize policy cash value.

(Image: Adobe Stock)