Understanding Inflation’s Effect When Purchasing Life Insurance
Total U.S. life insurance premium increased 21% in the second quarter of 2021, the most significant year-over-year increase since the third quarter of 1987. Year to date (YTD), whole life premium was 22% higher than sales in the first six months of 2020. Whole life represented 36% of the U.S. life insurance market in the second quarter. (LIMRA, 09/2021).
In the early 1940s, a $3,500 death benefit life insurance policy at my Father’s age would cost approximately $94 dollars annually. The death benefit would have paid for four years of college. For the 2020-2021 academic year, the average price of tuition and fees came to:
- $37,650 at private colleges.
- $10,560 at public colleges (in-state residents)
- $27,020 at public colleges (out-of-state residents)
While the process of inflation increases the cost of goods, the face amount of a life insurance policy generally does not increase. Therefore, as the average inflation rate from 1941-2021 was 3.73%, a person would need a $65,000 death benefit in 2021 to replace the $3,500 death benefit of 1941.
What would be the result of buying a $100,000 life policy in 1981 at age 40? By 2021, the inflation rate averaged 2.80% since 1981. Therefore, the cost of goods and services would require approximately $300,000 of death benefit to pay for what $100,000 would have cost 40 years ago.
The life insurance purchases and increases referenced in the first paragraph are not limited to inflation. For example, COVID-19 likely caused an increase in the awareness of mortality for many consumers, and such insecurity promotes the death benefit, premium, and cash value guarantees of whole life insurance.
The current inflation rate is 5.4% – the highest in 13 years. AIP Marketing Alliance’s team suggests that agents set up a life policy review with your clients to confirm the current death benefit of their life insurance still meets their life insurance goals and needs. At that time, you also can confirm that their named beneficiaries are up to date with the selected carrier.
If you need some life insurance policy review documents to help initiate the process with your clients, please contact AIP Marketing Alliance’s Business Development team at (800) 783-5206 Press #2 or send a message to email@example.com.
Considered accurate when published, but can change from time to time without notice.
Latest PostsNew Customizable Resources for February’s Insure Your Love MonthJanuary 2023 Have You Logged Into AIPMA’s Agent Tools Yet?January 2023 AIP Marketing Alliance’s 2022 Year in ReviewJanuary 2023
TagsJob Posting Roth Ira Long_Term_Care American Equity Integrity Marketing Group Ira Nationwide Social Media Protective Fidelity Guaranty Life Securian Financial Medicare_Supplements Limra North American Myaip Final Expense Annuity Fixed Indexed Annuity Permanent Life Insurance Myga Regulations Secure Act Culture Wink Legal And General Tax Season Open Enrollment Ethos Integrity Webinars Retirement Planning Web Meetings Working From Home Life_Insurance Tickit Senior Health Shop Equitrust Foresters Financial Transamerica Coronavirus Covid 19 Carriers Lincoln Financial Group Taxes Genworth Covid19 Insurance Fraud Term Life Insurance Women Bestow Disability_Insurance Tips Aipma Holiday Leads Nafa Financial Planning Drop Ticket Aig Global Atlantic Charity Fixed Annuity Regional Director
2041 E. Square Lake Road, Suite 100, Troy, Michigan 48085-3897
For more than 40 years, AIP Marketing Alliance (AIPMA) serves as a premier life insurance and annuity distribution partner to provide full-service support to independent wholesalers, brokerages and agents from our Troy, Michigan office. Copyright 2023