COVID-19 Ignites Surge in Life Insurance Demand—Smart or Folly?
When the COVID-19 pandemic started to spread around the globe in 2020, many folks panicked. These fears led to knee-jerk decisions.
We saw it play out on Wall Street as investors ditched stocks in search of safer investments, and the stock market plunged into bear market territory in March 2020. On Main Street, Americans sought out a different kind of protection, with insurance companies reporting double-digit increases in demand for life insurance policies.
Before the pandemic, around 50% of Americans had a life insurance policy. To put this into perspective, that’s down from 63% just ten years ago, according to the life insurance industry group, LIMRA.
Most folks didn’t invest in a life insurance policy for one of three reasons: 1) the cost was too high, 2) they thought their life insurance coverage from their employer was enough, or 3) they believed they had sufficient funds in savings and other investments. But when the COVID-19 death toll rose, many Americans changed their tune and bought life insurance policies in a seemingly knee-jerk way.
LIMRA reported a 7% year-over-year increase in life insurance policies in the U.S. in 2020, the most significant jump in annual policy sales since 1999.[1]
This surge in demand carried over into 2021, too. During the first six months of this year, total life insurance policies rose 8%. And with 36% of Americans planning to purchase life insurance this year, new policy sales could break through to new records.[2]
Who exactly is buying all these new life insurance policies? The younger generations.
According to MIB Group, there was an 8% year-over-year increase in life insurance applications for folks under 44 last year.[3] Millennials—those born between 1981 and 1996—have been the biggest buyers of life insurance over the past 18 months, with 45% stating they were likely to purchase life insurance in light of the COVID-19 pandemic.
The reality is that the global pandemic caused more folks to consider their mortality. It started the conversation about what’s necessary to take care of loved ones in the case of an untimely death. This is undoubtedly a positive development from the pandemic, as life insurance isn’t just for the older generations; it may be vital to protecting your family’s short-term and long-term financial needs.
Unfortunately, most folks don’t do the necessary research to determine which type of life insurance and what amount of coverage best fit their needs. Many don’t fully understand the differences between Term Life Insurance, Whole Life Insurance, and Universal Life Insurance. But more critical is that many buy policies with too little or too much coverage, either of which can be a problem.
At Nicollet Investment Management, we stress the importance of having a financial plan that best meets your personal needs and goals. This doesn’t just apply to your investment portfolios; the same holds for what steps you take to protect your financial future. It’s a personal decision.
Life insurance is one way to provide financial security for your loved ones—and having the right policy with the right coverage is vital. Life insurance is crucial when you are still accumulating assets in your portfolio, while your income is critical to your family’s financial health.
If the pandemic or a personal situation has prompted a conversation about life insurance and you’re unsure how to get started, consider giving us a call today. We do not sell life insurance, but we advise our clients on their choices for the coverage to buy. We integrate the life insurance decision with your overall financial strategy, and we’d be happy to discuss your life insurance options to help you determine what might be the right policy for you and your family.
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Reference Articles
https://www.cnbc.com/2020/10/14/life-insurance-sales-increase-due-to-coronavirus-pandemic.html
https://www.westernsouthern.com/learn/financial-education/why-life-insurance-is-important
[1] https://www.limra.com/en/newsroom/news-releases/2021/limra-u.s.-life-insurance-policy-sales-increase-2-in-2020/
[2] https://www.forbes.com/advisor/life-insurance/sales-highest-level/
[3] https://news.yahoo.com/covid-19-led-to-more-young-people-buying-life-insurance-164313383.html