Traditional Life Insurance Has New Appeal to Younger Buyers:
Survey Shows Under-40s Want Financial Security Sooner Rather Than Later
NEW YORK, N.Y., October 5, 2010 - According to a new national survey of owners of whole life insurance by The Guardian Life Insurance Company of America (Guardian), New York, N.Y., today’s policy buyers under the age of 40 are choosing whole life over other asset alternatives, based in large part on a strong desire to be financially secure as soon as possible.
The survey also revealed that a significant number of these younger policy holders are opting to pay for their policies quickly, often over ten years or less. Of those surveyed by Guardian, 35% of whole life purchasers under 40 said they wanted to pay off their premiums as quickly as possible, rather than using the more traditional approach of paying over a lifetime.
“This finding underscores a pronounced desire among Millenials and Gen Xers for financial security at an early age,” said Michael Ferik, senior vice president of individual life at Guardian speaking at Guardian’s second annual Whole Life Forum here today. At Guardian, purchases of “limited pay” policies, which can be paid-up over a shorter term, were up 152% as of June 30, compared with the same period in 2009.
The survey, spurred by an increase in Guardian whole life purchases by younger buyers in recent years, revealed that insurance buyers under age 40 are motivated by the desire for financial security “as soon as possible” (74%), as well as a desire to be debt-free as soon as possible (76%). These figures contrast with 68% of those over 40 who seek financial security as soon as possible and 69% of over 40s who believe it’s important to be debt-free as soon as possible.
“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,” said Ferik.
The Guardian survey of whole life buyers found that, while those under 40 see a multitude of benefits in owning whole life insurance, their first priority in buying a policy is to protect their families (72%), which is also the number one reason those over 40 buy it (79%). The guaranteed cash value of whole life insurance is the second most important reason for both those under 40 (66%) and over 40s (71%). Today more under 40s view whole life as a way to supplement retirement income (54 %), compared with half of those over 40. Younger buyers surveyed said they considered mutual funds, stocks, other types of life insurance and CDs before purchasing whole life.
Overall whole life sales have rebounded at Guardian--and elsewhere--this year. According to the Life Insurance Market Research Association (LIMRA), whole life sales across the industry were up 23% in the second quarter this year, the fourth consecutive quarter of double-digit growth. This brings whole life’s market share up to 31 % of total life US insurance sales--the highest share since 1998, LIMRA reports.
The Guardian survey shows this is partly because whole life insurance is not viewed as an “insurance product” by younger purchasers, who tend to view whole life as an alternative, low-risk asset class that can be used to help build long-term financial security.
Given their reliance on social networks and ability to absorb multiple points of information from various media, younger buyers of life insurance spent more time researching the purchase and discussing it with family and friends than older buyers did. For example:
- 58% of under 40s talked to family/friends vs. 26% of 40+
- 51% spent a “long time” considering whether to buy vs. 41% of 40+
- 46% did online research vs. 31% of 40+
- 37% visited carrier websites vs. 27% of 40+
- 36% read articles about whole life vs. 28% of 40+
“Satisfying long-range needs was more important than short-term rewards, and returns less important than safety among the young buyers we surveyed,” said Ferik. “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,” he said. “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,” Ferik said.
The Guardian survey was conducted in August 2010 of 242 whole life policy holders by The Melior Group, Philadelphia, Pa. The national survey sample included 155 non-customers and was supplemented by interviews with 87 Guardian customers. A total of 109 whole life owners under the age of 40 and 133 over the age of 40 participated in the survey online and by telephone.
About Guardian
A mutual insurer founded in 1860, The Guardian Life Insurance Company of America and its subsidiaries are committed to protecting individuals, business owners and their employees with life, long term care insurance, disability income, group medical and dental insurance products, and offer 401(k), annuities and other financial products. Guardian operates one of the largest dental networks in the United States, and protects more than six million employees and their families at 120,000 companies. The company has more than 5,400 employees in the United States and a network of over 3,000 financial representatives in more than 80 agencies nationwide.
For more information about Guardian, please visit www.GuardianLife.com.
Contacts:
Wendy Webster Coakley
Guardian
Tel: 413.395.4467
wendy_coakley@glic.com
Christine Cannon
Harden Partners
Tel: 631.776.0247
ccannon@hardenpartners.com
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