October 15, 2010
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Life Insurance Solidly Middle Class, LIMRA Study Shows

The Wall Street Journal on October 4 published an article titled “Shift to Wealthier Clientele Puts Life Insurers in a Bind” that suggests that permanent life insurance is a “rich person’s” product that is little used by the middle class. LIMRA statistics tell a different story.

The article questions whether the tax-free growth of a permanent policy’s cash value is a tax expenditure that sufficiently benefits the middle class. In the article, WSJ cited LIMRA statistics stating, among other things, that “High-end policies for $2 million and up, which can carry annual premiums of $20,000 or more, made up nearly 40% of the face value of new whole-life and universal-life policies sold in 2007.”

In response to this article, LIMRA wrote a letter to the editor pointing out that the article selectively used data. The LIMRA letter states that 73 percent of all policies are owned by people who earn less than $100,000—and that it’s rather obvious that people who earn more have more to protect and thus buy higher face amounts, which means greater premium payments. The LIMRA letter also acknowledges the crucial importance of the current tax rules governing permanent life insurance—and notes that that importance matters just as much to the middle class policyholders (73% of all purchasers) as it does to those who are better off, financially.

To read the complete LIMRA letter, click here.

NAIFA has shared this “set the record straight” LIMRA information with those Congressional offices that are preparing to defend permanent life insurance tax rules, should a challenge materialize. NAIFA continuously engages in "educational" efforts with all Congressional tax writers— and members in general—emphasizing that permanent life insurance is inherently a middle class product and underscoring that life insurance products reinforce a solid financial base to the US economy. It is the only mechanism that provides basic risk management and financial security to 75 million American families and helps businesses to continue in spite of the loss of key employees. It is also a crucial source of critical investment capital to the U.S. economy.

Read the NAIFA Blog response Life Insurance Is Important to Middle Class Americans

NAIFA Staff Contact: Michael L. Kerley, Senior Vice President – Federal Government Relations, at (703) 770-8155; or Dani Kehoe, NAIFA Outside Counsel.