The first supersonic flight was welcomed with a huge booming sound across the California desert as the X-1 became the first manned airplane to reach Mach 1. The five-minute flight in 1947 was a historic moment.
Another historic milestone occurred in the insurance industry last year but was greeted with considerably less fanfare. Like the flight of the X-1, though, last year's event marked a watershed for Americans, at least for their financial futures.
For the first time ever, more people owned group life insurance rather than individual policies in 2016, according to LIMRA (Life Insurance Ownership in Focus, 2016 LIMRA Ownership Study). While no sonic boom accompanied the milestone, the preeminence of group life insurance spoke volumes about the credibility that Americans place in their employers as a source of financial security and wellness.
Like the X-1, sales of life insurance have gone on to notch several other remarkable milestones:
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The number of people who own some form of life insurance has grown to a record 172 million (2016 LIMRA Ownership Study). The increase in life insurance ownership is being driven primarily by people ages 18 to 44 – the prime time for starting and raising families – as ownership by people age 45 and older declines.
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Sales of group whole life policies, typically available on a voluntary or employee-paid basis, increased by 19 percent in the first two quarters in 2017 (LIMRA U.S. Worksite/Voluntary Sales, 2017 Second Quarter Review).
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Premiums for individual whole life insurance have grown every year since 2006 as consumers have gravitated to the product's straight-forward design, built-in guarantees, and dividend potential (U.S. Retail Life Insurance Sales, Third Quarter 2016). Whole life now accounts for 37 percent of the entire individual life insurance market, the study finds.
These trends are positive news for continued strong sales of life insurance at the workplace, especially for group whole life insurance. Group whole life can be seen as a financial building block, providing insureds' families with a source of guaranteed financial protection.
The underlying value of whole life was punctuated with an exclamation point by the Great Recession of 2007—2009 when more people began gravitating to the product's guarantees, including guaranteed premiums, cash value, and death benefit. Whole life insurance policies are not investments and the guaranteed cash value does not fluctuate as a result of events in the financial markets. While the stock market dropped like a stone, devastating retirement accounts and other equity-oriented investments, whole life policies remained generally unaffected.
The stability and permanency of whole life provides financial protection against the premature death of a breadwinner. But whole life also offers “living benefits” that can be accessed for a myriad of financial needs. The cash value that grows inside a policy is guaranteed, meaning it increases each year, will never decline due to changes in the financial markets, and may offer a reliable source of cash – even during economic downturns.
Whole life can be a dependable financial asset, especially for middle-income Americans. Consider that many financial professionals recommend accumulating six to nine months' of savings as a hedge against financial emergencies such as a job loss, serious illness or injury, or other problem. Yet, 28 percent of Americans report having less than $500 in emergency savings and 45 percent would have difficulty managing an unexpected $5,000 expense, according to the 2017 MassMutual Middle America Financial Security study (2017 MassMutual Middle America Financial Security Study).
Policyowners can access their cash values through loans or partial surrenders. During and immediately after the Great Recession – from 2008 through the first half of 2010 — MassMutual reported that loans from whole life policies increased by $600 million, or approximately 12 percent. This increase in loan use suggests that loans were likely driven by individual financial needs.
The cash value from a policy can be used for any reason, including as a source of emergency funds. The cash value accumulation is often considered for longer-term needs such as helping to pay college tuition or other educational expenses or to supplement retirement income.
Whole life policies can be especially valuable when planning for retirement. The death benefit can provide a source of supplemental retirement income to help replace the loss of Social Security benefits after the death of a spouse.
It should be noted that accessing the cash values through borrowing or partial surrenders will reduce the death benefit and cash value and could increase the chance that the policy will lapse, and may result in a tax liability if the policy terminates before the death of the insured.
Few financial products can compare with whole life's guarantees, security or flexibility. It's a big reason why group whole life continues to gain momentum in the workplace as more Americans take stock of their personal finances and security. Like the X-1 and its supersonic successors, whole life continues to soar ever higher as it quickly becomes the engine powering many Americans' financial security and aspirations.
To learn more, visit http://www.massmutualatwork.com/ or call 1-855-877-6161.
Jonathan Shuman leads sales of workplace benefits for Massachusetts Mutual Life Insurance Co. (MassMutual).
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