Term Life Insurance Sales Lower In Second Quarter

There was a sharp increase in the number of life insurance policies sold in the first quarter of 2010 when compared with the same time period in 2009.  And now the second quarter of 2010 has posted another strong increase.  Compared with the second quarter of 2009, annualized premiums for individual life insurance policies were up 7% in the second quarter of this year.

Whole life, universal life, and variable universal life are all being purchased more this year than last year.  But term life insurance did not show gains; annualized premiums for term policies dropped 11% in the second quarter of 2010.  I find this interesting, given that term life insurance tends to be the most appropriate choice for the majority of the population that needs to secure death benefits.

It’s possible that the slowly-rebounding economy is responsible for the shift from term to permanent life insurance products, and for the overall upswing in total annualized premiums.  For the last couple years, the recession has meant that most of the country has been tightening their budgets.  Term life insurance policies are a lot less expensive than permanent policies, so for people who needed to buy life insurance during the recession, term products were likely more popular.  But now that the economy is showing signs of recovering, people may be more apt to purchase higher-cost permanent life insurance policies that grow cash value or include an investment component.  It will be interesting to see how the numbers play out for the rest of 2010… will term life insurance policy sales bounce back, or will the growth of permanent policies continue?

What To Do With Life Insurance Proceeds

When a person loses a loved one and is the beneficiary of a large chunk of life insurance money, the handling of that money might take a back seat to dealing with grief and loss. A death in the family – especially if the person who died is a primary earner – will likely result in some financial upheaval, but it will also be emotionally devastating, and survivors may be ill-equipped to make major decisions about what to do with the life insurance money they receive, especially if it’s a large sum.

A recent NPR article details how the families of servicemen and women killed in battle are being given “checkbooks” that represent the value of the fallen soldier’s life insurance policy. The life insurance companies are keeping the money in their own investment accounts, earning several percent interest, and paying 0.5% interest to the policy beneficiaries. The carriers point out that if they didn’t offer this option for the families to earn half a percent interest on the money, it might just sit somewhere, earning no interest at all. I suppose that’s true, but families should be aware that they have lots of options, and that taking the default choice of letting the life insurance company handle the money for them (and keep a good chunk of the interest earned) might not be the best one.

Trying to figure out what to do with a large chunk of money from a life insurance settlement can be difficult in the best of times, and nearly impossible when a person is grieving. It makes much more sense to sketch out the details of what your family would do with any life insurance money before that situation arises. If you don’t die while your life insurance policy is in force, the plan won’t ever be needed. But if you do pass away and leave your beneficiaries with life insurance money, it will make things a lot easier for them if the family has a plan in place and they can simply use the money as planned, without having to make decisions while grieving. And it will make it much less likely that the surviving family members will be duped by unscrupulous “advisors” or companies that don’t have the beneficiaries’ best interests in mind.

A financial advisor can provide advice, but there are also lots of financial advice websites that can provide guidance for people trying to figure out what to do with any sort of windfall, including life insurance proceeds. Planning now for what you might do with life insurance money will likely make things easier if and when you find yourself receiving life insurance following the death of a loved one.