Buyers under 40 Choosing Whole Life for Coverage

A recent national survey of owners of whole life insurance from The Guardian Life Insurance Company of America, points out today’s policy buyers under 40 years of age are going with whole life over other asset options. The report notes that this is due in large part to a strong desire to be financially secure sooner rather than later.

According to the survey, a large number of the younger policyholders are choosing to pay for their policies in a fast amount of time, often over a decade or less.

Numbers from the survey show that 35 percent of whole life purchasers under the age of 40 indicated they want to pay off their policies over a decade or less.

A spokesman for Guardian noted, this finding underscores a pronounced desire among Millenials and GenXers for financial security at an early age. At Guardian, those purchasing “limited pay” policies, which can be paid-up over a shorter term, increased 152 percent as of June 30, compare with the same time frame in 2009.

The survey, spurred by growth in Guardian whole life acquisitions by younger policyholders in recent times, showed that insurance buyers younger than 40 are motivated by the wish to secure financial security “as soon as possible” (74 percent), along with a desire to be debt-free sooner rather than later (76 percent). Those numbers contrast with the 68 percent of those over 40 who look for financial security quickly and 69 percent of over 40s who feel it is important to be debt-free as soon as can be.

According to a Guardian spokesman, “Perhaps due to the historically high college loan burden carried by today’s graduates, this appreciation of financial security and desire to be debt-free reflect a sea change in attitude from the ‘live for today’ ethos Boomers were known for.”

More numbers from the survey note that while those under 40 witness a multitude of benefits in owning whole life insurance, their top priority in purchasing a policy is for protection for their families (72 percent), which is also the top reason those over 40 purchase it (79 percent).

The guaranteed cash value for whole life insurance ranked as the second most important reason for both those under 40 (66 percent) and over 40s (71 percent). As it stands today, more individuals under their 40s look at whole life as a means to supplement retirement income (54 percent) compared with half of those over 40. Younger buyers indicated they looked at other types of life insurance, mutual funds, stocks and CDs prior to acquiring whole life.

According to information from the Life Insurance Market Research Association (LIMRA), whole life sales across the industry increased 23 percent in Q2 2010, the fourth straight quarter of double-digit growth. LIMRA adds that this brings whole life’s market share up to 31 percent of total life U.S. insurance sales – the largest share going back to 1998.

The Guardian survey points out that this is partly a result of whole life insurance not being looked at as an “insurance product’ by younger buyers, who tend to view whole life as an alternative, low-risk asset class that can be used to assist in building long-term financial security.

Since younger life insurance buyers utilize social networks and can absorb numerous points of information from different media, they tend to spend more time researching the acquisition and talking it over with family and friends than older individuals did.

To highlight those feelings, 58 percent of those under 40 talked to family and friends vs. 26 percent of those 40 or older; 51 percent put in a “long time” of consideration whether to purchase vs. 41 percent of 40+; 46 percent conducted online research vs. 31 percent of those 40+; 37 percent checked out carrier Web sites vs. 27 percent of 40+; and 36 percent read articles regarding whole life vs. 28 percent of 40+

Guardian’s spokesman adds that, “Satisfying long-range needs was more important than short-term rewards, and returns less important than safety among the young buyers we surveyed. It is clear from our survey that whole life purchasers understand its value not only as an insurance product, but as an alternative low-risk asset for long-term financial security. They see whole life’s benefits for meeting unanticipated financial needs that arrive while still alive as better than borrowing from a 401 (k) plan or, for now at least, betting on the stock market.”