Life insurance is designed to protect and provide for loved ones upon the eventuality of death. Depending on the type of life insurance purchased, it is a valued way to provide a level of financial security to spouses or the next generation.
It is not, however, a universally purchased item.
Our most recent wealth segmentation series study, Asset Allocation, Portfolios and Primary Providers, shows that less than two-thirds of all affluent investors own life insurance policies. The percentage of ownership is relatively constant no matter the wealth level of the investor.
The study examines investors in three wealth segments – Mass Affluent, with a net worth of $100,000 to $1 million not including primary residence; Millionaire, with a net worth between $1 million and $5 million; and Ultra High Net Worth, with a net worth between $5 million and $25 million.
The range of ownership of life insurance policies goes from 55 percent of UHNW investors to 59 percent of Mass Affluent investors. In all cases, the highest percentage of owners have less than $100,000 in life insurance in their policies.
“For some wealthier investors, life insurance is seen as an unnecessary purchase, because they have their wealth invested in products that will produce the same result of financial support for loved ones when they pass away,’’ said Spectrem president George H. Walper Jr. “For less wealthy investors, life insurance is an expense, and investors may think there are better ways to spend their investable assets.”
Among Mass Affluent investors, 41 percent have policies with less than $100,000 in face value, and 29 percent have policies ranging between $100,000 and $250,000 in face value. Among Millionaires, 31 percent own policies with a face value under $100,000 and 27 percent have policies with a face value between $100,000 and $250,000. The UHNW investors with life insurance are 26 percent with less than $100,000 in face value, 16 percent with between $100,000 and $250,000 in face value, and 28 percent with more than $1 million in insurance policy face value.
Because Mass Affluent investors are generally younger and still working, it makes sense that they have the highest percentage of life insurance policyholders who get their policies through their employer. Fifty-six percent have life insurance from their work, while 44 percent have personal policies.
Similarly, younger Millionaires are more likely to have life insurance and more likely to have that life insurance paid for by an employer. Seventy-nine percent of Millionaires under the age of 36 have a life insurance policy, and 71 percent have a life insurance policy paid for by an employer.
It is not until you get to the 55 and over age group that the percentage of Millionaires with a life insurance policy paid for by an employer drops below 50 percent.
Among all wealth segments, Met Life and Prudential are the most like providers. Met Life has 18 percent of Mass Affluent, 16 percent of Millionaires and 19 percent of UHNW. Prudential’s percentages are 10 percent (Mass Affluent), 12 percent (Millionaires) and 9 percent (UHNW).