Household Trends in U.S. Life Insurance Ownership

Household Trends in U.S. Life Insurance Ownership Full Report Cheryl D. Retzloff, LLIF, ACS Markets Research 860-285-7738 cretzloff@limra.com

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A 2010 Report HOUSEHOLD TRENDS IN U.S. LIFE INSURANCE OWNERSHIP 2010, LL Global, Inc. SM This publication is a benefit of LIMRA membership. No part may be shared with other organizations or reproduced in any form without LL Global s written permission. 008716-1110 (562-42-0-OA5) Printed in U.S.A.

CONTENTS Page SUMMARY... 6 RECOMMENDATIONS... 8 LIFE INSURANCE OWNERSHIP TRENDS... 10 Individual Life Insurance Ownership Is at 50-Year Low... 10 Average Face Amounts Have Declined... 11 INDIVIDUAL LIFE INSURANCE... 12 Only Some Household Members Are Covered... 12 Few Insured Households Buy Both Term and Perm Insurance... 13 Older Households Depend on Permanent Insurance... 14 Type of Insurance Affects Amount of Coverage... 15 Most Households Buy Individual Life Policies Face-to-Face... 16 Households Spend Little for Individual Life Insurance... 17 INDIVIDUAL LIFE VERSUS GROUP LIFE... 18 Fewer Middle-Income Households Own Both Individual and Group Life... 18 More Insured Households Rely on Group Coverage... 19 LIFE INSURANCE OWNERSHIP BY INCOME... 20 Lower-Middle-Income Households See Largest Decline in Ownership... 20 Insured High-Income Households Increase Average Coverage... 21 LIFE INSURANCE OWNERSHIP BY AGE... 22 Key Age Groups See Huge Declines in Life Insurance Ownership... 22 Most Age Groups Increase Length of Time They Can Replace Income... 23

Page LIFE INSURANCE OWNERSHIP BY HOUSEHOLD TYPE... 24 Life Insurance Ownership for Parents Is at All-Time Low... 24 Insured Families With Children Have Highest Amounts of Coverage... 25 LIFE INSURANCE OWNERSHIP BY LIFE STAGE... 26 Families With Children Are Less Likely to Have Life Insurance Today... 26 Years of Coverage Declines for Young Families and Increases for Older Families... 27 LIFE INSURANCE OWNERSHIP BY REGION... 28 Western Households Least Likely to Own Individual Life Insurance... 28 West Has Largest Increase in Amount of Coverage... 29 ADEQUACY OF LIFE INSURANCE COVERAGE... 30 Number of Underinsured Households Grows... 30 Parents and Households Under Age 45 Most Primed to Buy... 31 Many Households With Children Not Prepared for Premature Death... 32 Households Delay Buying Life Insurance for Many Reasons... 33 Many Insured Households Want to Review Life Insurance Frequently... 34 Interest in Financial Products and Services Declines... 35 Trust Influences the Buying Decision... 36 METHODOLOGY... 37 RELATED LINKS... 41

FIGURES AND TABLES Page Figure 1 Trends in U.S. Life Insurance Ownership... 10 Figure 2 Trends in Type of Individual Life Owned Insureds... 13 Figure 3 Mean Amount of Coverage by Type of Individual Life Insureds... 15 Figure 4 How Households Purchase Individual Life Policies... 16 Figure 5 Trends in Need for Life Insurance and Future Purchase Intentions... 30 Figure 6 Influences on the Life Insurance Buying Decision... 36 Table 1 Trends in Amount of Coverage*... 11 Table 2 Household Members Owning Individual Life... 12 Table 3 Type of Individual Life Owned by Age of Household Head Insureds... 14 Table 4 Annual Individual Life Premium and Number of Policies Owned... 17 Table 5 Individual and Group Ownership by Household Income Insureds*... 18 Table 6 Individual and Group Ownership by Age of Household Head Insureds... 19 Table 7 Ownership by Household Income*... 20 Table 8 Mean Coverage by Household Income*... 21 Table 9 Ownership by Age of Household Head... 22 Table 10 Mean Coverage by Age of Household Head*... 23 Table 11 Ownership by Household Type... 24 Table 12 Mean Coverage by Household Type*... 25 Table 13 Ownership by Life Stage... 26 Table 14 Mean Coverage by Life Stage*... 27 Table 15 Ownership by Region... 28 Table 16 Mean Coverage by Region*... 29

Page Table 17 Need for Life Insurance and Future Purchase Intentions by Demographics... 31 Table 18 Family s Financial Situation If Primary Wage Earner Dies... 32 Table 19 Reasons Households Have Not Bought More Life Insurance... 33 Table 20 How Often Insureds Prefer to Review Life Insurance Coverage... 34 Table 21 Financial Activities for Which Households Want Help From Professionals... 35 Table A-1 Survey Quota Groups and Numbers of Completed Questionnaires... 38 Table A-2 Demographic Distribution of 2010 and 2004 Survey Samples... 39 Table A-3 Household Income Distributions in 2004 and 2010... 40

SUMMARY Periodically, LIMRA looks at how well the industry is doing at reaching U.S. households to meet their life insurance needs. The 2010 study indicates that the industry needs to do a better job to help families understand their financial vulnerability if someone dies unexpectedly. Insurers especially need to find ways to reach more middle-market households. Since first conducted in 1960, LIMRA s U.S. Life Insurance Ownership study has measured trends in life insurance ownership and adequacy of coverage for the U.S. population. In 2010 we surveyed 3,766 households comprising a total of 9,390 persons about the households individual and group life insurance coverage and their attitudes about their coverage. One needs to keep in mind that the current life ownership study was conducted during the worst economic time since the Great Depression. Consumers are living in a world where they have had to cut spending to make up for declines in income, and many are trying to pay off the considerable debt that they have accumulated. Indicators suggest that consumers are delaying any decisions that may have financial consequences: Both marriage rates and birth rates are down; and consumers are delaying all types of purchases, from automobiles, homes, appliances, electronics, and clothing to even medical diagnostic testing. Our study found that consumers are currently reluctant to talk with financial professionals about anything such as savings strategy, retirement savings, children s education funds, investment strategy, and various types of insurance products. While the current economy may have contributed to the large declines in life insurance ownership, it is not the sole reason for some of the largest declines we have ever measured. Life insurance ownership, especially ownership of individual life insurance, has been declining for 50 years during both good and bad economic cycles. Some key findings: Life insurance ownership in the U.S. has hit a 50-year low. Three in 10 households carry no life insurance on anyone in the household, and half of U.S. households now believe they are underinsured. Ownership of individual life insurance declined among all markets low, middle, and high-income households. In the past six years, key markets for life insurance sales saw large declines in ownership of individual life insurance: older married households with children under 18, couples with no dependent children, and middle-income households. 6

Despite high unemployment, the study reveals a continuing increase in the proportion of insured households having only group life insurance 37 percent in 2010, up from 32 percent in 2004 and 29 percent in 1998. This is primarily due to households with group coverage not buying any individual life insurance. After adjusting for inflation, households with life insurance average almost $280,000 of coverage down $30,000 from six years ago. But they can replace their income for about the same period of time as in 2004, probably reflecting the declines in incomes in the U.S. For the industry, this suggests a possible decline in total premium income, as households need to buy less life insurance to cover smaller incomes. But an opportunity exists to sell additional life insurance to the 43 percent of insured households that think their current coverage is inadequate. Half of households with individual life insurance carry only permanent life insurance and one third depend entirely on term coverage. Few insured households supplement permanent coverage with some lower-cost term insurance, which could be why so many are underinsured. Households with only permanent coverage can replace their income for only 2.7 years, compared with 3.6 years for households with only term coverage and 4.3 years for households with both types. Today 77 percent of husband-wife families with children under 18 have life insurance coverage, compared with 90 percent in 2004. The loss of group life insurance coverage is leaving more families with children under 18 without life insurance protection than six years ago. Half of U.S. households have unmet life insurance needs: Fifty-eight million say they do not have enough life insurance. Even among households with $125,000 or more of annual income, one fourth believe they are inadequately insured. Seven in 10 families with children under 18 would have trouble paying their bills if their primary wage earners died unexpectedly. Without the safety net that life insurance can provide, the majority of households have limited time before savings run out to make financial adjustments if the family is to survive the death of a wage earner. About 29 million household heads think they will purchase life insurance for themselves or others in their households in the next 12 months. About 1 in 4 low- and middle-income households and 2 in 10 high-income households say they might buy life insurance in the next 12 months. A gap of over two and a half years exists between the amounts of coverage households believe they need and what they have actually bought. On average, households say they should have enough life insurance to replace their incomes for 6.2 years, but in reality own enough to replace the household s income for only 3.5 years. Households delay buying life insurance for four primary reasons: They have other financial priorities right now, they think it is too expensive, they have difficulty making decisions about the purchase, and they just plain procrastinate. 7

RECOMMENDATIONS Contact current clients they may be your best prospects. One third of life insurance owners want to be contacted at least every two years to review coverage and almost half want to review coverage within five years. More than 4 in 10 households that already own some life insurance believe they are underinsured, and 1 in 4 are considering buying more. While these households realize they need more life insurance, they may not take action on their own. You will need to approach them, as many procrastinate and 17 percent say they are waiting for someone to contact them. Target parents and young households. Age is a key indicator of who will buy life insurance soon: The younger the household, the more likely it is considering purchasing life insurance in the next year. The presence of children under 18 in the household is the other critical indicator that a household may be ready to buy. Target middle-market households. Middle-income households have among the greatest needs for life insurance, as many recognize they are underinsured and 1 in 4 are considering purchasing life insurance in the next year. Sixty-four percent of them would either immediately have trouble meeting everyday living expenses or could cover living expenses for only a few months upon the premature death of a wage earner. Since they have limited savings or assets, life insurance proceeds can be the best option to give them enough time to adjust financially. Help consumers prioritize importance of life insurance coverage. In this challenging economy, consumers are delaying many financial decisions. They need someone to explore with them the critical financial risks their families face by delaying insurance purchases. One third of households with no life insurance and one fourth of households with some life insurance say they haven t bought needed coverage because they just haven t gotten around to it. One third of U.S. households admit they would immediately have trouble meeting everyday living expenses if a primary wage earner died and 29 percent could cover only a few months before being in financial trouble. 8

Recognize that offering a term insurance option may bring you a sale. The top reasons households put off buying life insurance are they have other financial priorities and they think they can t afford life insurance. Giving them a low-cost term insurance option to provide the extra coverage many think they need may mean the difference between closing the deal and walking away without a sale. Build trust. Trust is the key element that must be present when consumers are deciding whether to buy life insurance. Referrals help, as consumers say they are more likely to buy from a sales representative who was recommended by someone they trust. Also, build trust by tailoring your recommendations to their specific needs. Consumers say they are more likely to buy if the sales representative reviews and analyzes their life insurance needs or if life insurance needs are presented as part of a total financial plan. 9

LIFE INSURANCE OWNERSHIP TRENDS Three in 10 U.S. households (35 million) have no life insurance coverage at all 11 million more than just six years ago. Household ownership of individual life and group life insurance both have declined since 2004. INDIVIDUAL LIFE INSURANCE OWNERSHIP IS AT 50-YEAR LOW Only 44 percent of households own individual life insurance, and just 34 percent currently own policies they purchased face-to-face. As the size of the agency force declined over the years and alternative distribution options became available, fewer households make their life insurance purchases face-to-face today. From 1984 to 2004, ownership of group life insurance remained steady. In 2010, fewer households have group life insurance than did six years ago, probably reflecting current high unemployment rates. In the past year, someone lose their job in 15 percent of U.S. households. 1 Figure 1 Trends in U.S. Life Insurance Ownership 90% 80% 70% 60% 50% 40% 30% 83% 83% 81% 78% 72% 65% 62% 56% 55% 46% 54% 53% 47% 76% 78% 52% 52% 50% 50% 42% 41% 70% 49% 44% 34% 20% 0 1960 1976 1984 1992 1998 2004 2010 Total Group Individual Face-to-Face 1 Life Insurance in a Tough Economy, LIMRA, 2010. 10

AVERAGE FACE AMOUNTS HAVE DECLINED Insured households carry enough life insurance to replace household income for an average of 3.5 years, almost the same period of time as in 2004. But after adjusting for inflation, the average face amount owned by insured households is lower than it was six years ago probably reflecting declines in household income. The average amount of life insurance coverage insured households carry declined by over $30,000 in constant dollars since 2004 declining to about $280,000 in 2010. Since 1998, the mean amount of individual life insurance households carry grew more rapidly than group coverage did (about a $66,000 increase versus $25,000, respectively). Table 1 Trends in Amount of Coverage* Mean Coverage Median Coverage 1998 2004 2010 1998 2004 2010 Any life insurance $251,100 $312,900 $279,900 $134,000 $151,400 $128,000 Individual life insurance** 201,000 295,900 267,300 100,500 138,300 115,000 Sold face-to-face 208,100 306,100 284,000 107,200 145,000 140,000 Group life insurance 139,900 178,500 165,300 73,700 99,900 100,000 Years of replacement 2.4 3.6 3.5 NA NA NA coverage *Coverage is in 2010 dollars **Includes life insurance sold face-to-face and through direct means Subset of individual life insurance Ratio of total insurance coverage to annual household income NA Not applicable 11

INDIVIDUAL LIFE INSURANCE Almost 6 in 10 U.S. households do not have anyone covered by individual life. Even among households with individual life policies, only 54 percent cover everyone in the household. ONLY SOME HOUSEHOLD MEMBERS ARE COVERED About 1 in 4 U.S. households insure all household members with individual life insurance coverage, similar to past years. Even among households with individual life policies, 46 percent cover only some household members. Insured households on average own 2.6 individual policies in 2010, compared with 2.4 in 2004. Married households with children under 18 own the greatest number of individual life policies and single households have the fewest (3.4 versus 1.9, respectively) (Table 4). Table 2 Household Members Owning Individual Life All Households Insured Households 1998 2004 2010 1998 2004 2010 No members covered 50% 50% 56% NA NA NA All members covered 28 27 24 56% 54% 54% Some members covered 22 23 20 44 46 46 100% 100% 100% 100% 100% 100% NA Not applicable 12

FEW INSURED HOUSEHOLDS BUY BOTH TERM AND PERM INSURANCE Half of households with individual life insurance own only permanent policies and one third own only term coverage. Few households appear to apply a strategy of supplementing their permanent insurance with some lower-cost term coverage. Possibly this is a key reason so many U.S. households that already own some life insurance believe they are underinsured. In 2010, 50 percent of insured households had some term life insurance coverage down from a peak of 59 percent in 2004. According to LIMRA s U.S. Individual Life Sales survey, 2010 term life sales are down 7 percent. Rate increases and fewer term product offerings may be making term insurance less attractive to consumers. More than two thirds of households with individual life insurance carry some permanent life insurance and for half of insured households all their coverage is from permanent policies up nine percentage points since 2004. The increase in ownership of only permanent life insurance may reflect the recent increase in the popularity of whole life. According to LIMRA s 2010 U.S. Individual Life Sales survey, whole life sales are up 19 percent through June 2010. Figure 2 Trends in Type of Individual Life Owned Insureds 20% 28% 36% 32% 58% 43% 41% 50% 22% 29% 23% 18% Term Only Perm Only Both 1992 1998 2004 2010 13

OLDER HOUSEHOLDS DEPEND ON PERMANENT INSURANCE Households whose heads are age 45 and older are much more likely to own permanent life insurance than term insurance. Younger households, under age 45, are just as likely to have bought term insurance as permanent life insurance. Eight in 10 households age 65 and older have some permanent life insurance as part of their individual life portfolios, and 71 percent have only permanent coverage. The younger the household, the more likely it depends only on term life insurance coverage. Few of the younger households carry both permanent and term insurance. Table 3 Type of Individual Life Owned by Age of Household Head Insureds Percent of Households Owning Only Term Only Perm Both Any Term Any Perm 2004 2010 2004 2010 2004 2010 2004 2010 2004 2010 Under age 35 54% 41% 34% 43% 12% 16% 66% 57% 46% 59% 35 44 41 39 28 42 31 19 72 58 59 61 45 54 37 31 37 47 26 22 63 53 63 69 55 64 36 29 44 51 20 20 56 49 64 71 65 or older 20 17 58 71 22 12 42 29 80 83 All households 36% 32% 41% 50% 23% 18% 59% 50% 64% 68% 14

TYPE OF INSURANCE AFFECTS AMOUNT OF COVERAGE Households that rely solely on permanent life insurance carry one third less coverage than do those with only term life policies. Households depending only on permanent insurance carry enough life insurance to replace their income for only 2.7 years, while households purchasing only term insurance can replace their income for 3.6 years. Households with only permanent life insurance coverage have the lowest amounts of coverage averaging $197,400, which will replace their income for only 2.7 years. Households that buy only term life insurance can replace income for an additional year compared with households buying only permanent life insurance. Households that buy combinations of permanent and term insurance have the best coverage of all, averaging $407,700, which would replace their household income for 4.3 years. Figure 3 Mean Amount of Coverage by Type of Individual Life Insureds Both $407,700 4.3 years* 18% 32% Term only $300,800 3.6 years* Perm only $197,400 2.7 years* 50% Term only Perm only Both *Ratio of household individual life coverage to annual household income 15

MOST HOUSEHOLDS BUY INDIVIDUAL LIFE POLICIES FACE-TO-FACE Two thirds of U.S. households bought all their individual life policies in person from insurance agents, brokers, or other financial advisors. Some policies are recent purchases, but others may have been bought five, 10, or even 20 years ago. The higher the household income, the more likely individual life policies were bought through financial professionals. High-asset households ($500,000 or more) and high-income households ($150,000 or more) that usually have more complex life insurance needs are more likely than other households to have purchased all their individual life insurance policies face-to-face from financial professionals (80 percent and 77 percent, respectively). Households that bought only direct from companies, banks, or credit unions, through the mail, by telephone, or on the Internet are more likely to be ages 18 to 24 (35 percent) and single (30 percent). Term life insurance policies are more likely to be bought through direct means than permanent life insurance policies (31 percent versus 20 percent, respectively). Few households bought their individual life insurance policies both in person and through direct purchase. Figure 4 How Households Purchase Individual Life Policies 11% 22% 67% In person only Direct only* Both *Direct from company, bank, credit union, mail, telephone or Internet 16

HOUSEHOLDS SPEND LITTLE FOR INDIVIDUAL LIFE INSURANCE Almost 6 in 10 U.S. households spend no money at all for individual life insurance. Insured households put very small proportions of their income toward individual life insurance coverage averaging only 1.5 percent of household income on individual life premiums. Insured households own 2.6 individual life policies, and on average spend $1,057 annually for these policies. Fifteen percent have at least one paid-up policy. Married households with children and high-income households own more policies than other households, thereby spending the most annually for individual life insurance protection. Fourteen percent of insured households have no idea how much they are paying for their individual life policies. Table 4 Annual Individual Life Premium and Number of Policies Owned Annual Mean* Annual Median* Percent Paid-Up** Percent Unknown*** Number of Policies Age of Household Head Under age 35 $1,032 $500 13% 15% 2.4 35 44 961 500 15 16 2.7 45 54 1,020 500 11 14 2.6 55 64 1,251 650 12 11 2.6 65 or older 990 200 25 14 2.4 Household Income Under $35,000 $555 $220 14% 12% 2.0 $35,000 $49,999 653 300 21 17 2.3 $50,000 $99,999 1,043 504 15 13 2.5 $100,000 $124,999 1,400 700 9 15 3.0 $125,000 and over 1,744 950 14 14 3.1 Marital Status Married with children $1,304 $600 13% 14% 3.4 Married no children 1,213 650 16 15 2.6 Not married 610 240 16 12 1.9 Insured households $1,057 $500 15% 14% 2.6 *Includes paid-up policies **Percent of households with all paid-up policies or households with some paid-up policies and other policies where the premium amount is unknown ***Percent of households where premiums are unknown for all policies 17

INDIVIDUAL LIFE VERSUS GROUP LIFE Households whose only life insurance protection is group life obtained through employers or labor unions carry the lowest amounts of insurance protection. Those households that rely primarily on individual life they purchased themselves or which have combinations of individual life and group life have considerably more coverage. FEWER MIDDLE-INCOME HOUSEHOLDS OWN BOTH INDIVIDUAL AND GROUP LIFE Insured households with incomes between $35,000 and $124,999 show a huge shift away from owning both individual and group life insurance. They are much more likely to carry only one or the other than they did in 2004. This is probably due to a combination of factors. In this tough economy, 43 percent of Americans say a major reason they have not bought more life insurance is because they have other financial priorities right now. Also, current high unemployment rates leave more households without access to group coverage through employers. Households owning both individual and group life can replace household income for 4.8 years, about the same period of time as in 2004. With the shift away from households owning both group life and individual life, the amount of insurance protection households have has declined. Group coverage will replace income for only 2.4 years, a drop of one year since 2004. And individual coverage will replace income for 3.6 years, almost one year less than in 2004. Table 5 Individual and Group Ownership by Household Income Insureds* Individual Only Group Only Both 2004 2010 2004 2010 2004 2010 Under $35,000 52% 57% 29% 25% 19% 18% $35,000 $49,999 30 32 32 39 38 30 $50,000 $99,999 18 23 38 43 44 34 $100,000 $124,999 19 21 33 37 48 41 $125,000 and over 27 25 28 31 45 44 Insured households 28% 29% 32% 37% 40% 34% Mean coverage** $361,600 $249,600 $211,200 $182,800 $482,400 $423,800 Years of replacement coverage*** 4.5 3.6 3.4 2.4 4.6 4.8 *The Methodology section describes in detail the income classes used. **Coverage is in 2010 dollars. ***Ratio of total insurance coverage to annual household income 18

MORE INSURED HOUSEHOLDS RELY ON GROUP COVERAGE From young to old, today a greater proportion of households rely on group life insurance coverage through their employers to provide them with their only life insurance protection than did in 2004. Half of insured households under age 35 and one third between ages 45 and 64 have only group life insurance coverage. As people approach retirement age, they are less likely to rely on group life insurance to provide death benefits. Nonetheless, 1 in 4 insured seniors have only group life insurance. This may reflect older workers delaying retirement because the amounts of funds in their retirement accounts have declined with market downturns in recent years. In 26 percent of households over age 65, someone is still working. Households in the 45-to-64 age group are the most likely to carry both individual and group life insurance. Table 6 Individual and Group Ownership by Age of Household Head Insureds Individual Only Group Only Both 2004 2010 2004 2010 2004 2010 Under age 35 20% 23% 47% 51% 33% 26% 35 44 16 27 41 40 43 32 45 54 23 29 26 34 51 37 55 64 32 30 29 31 39 39 65 or older 58 43 14 25 28 32 Insured households 28% 29% 32% 37% 40% 34% 19

LIFE INSURANCE OWNERSHIP BY INCOME Life insurance ownership increases with household income, but since 2004 the likelihood of having life insurance coverage has declined in every income group low, middle, and affluent. LOWER-MIDDLE-INCOME HOUSEHOLDS SEE LARGEST DECLINE IN OWNERSHIP Only 2 in 3 households with incomes between $35,000 and $49,999 have any life insurance protection down 16 percentage points since 2004. This large decline is due to fewer lower-middle-income households owning individual life insurance and/or group life insurance. Ownership of life insurance has declined even among the highest income households. In 2004, only 7 percent of households making $125,000 or more had no life insurance, but high-income households with no life insurance protection doubled to 14 percent in 2010. This decline was primarily due to a drop in individual life ownership. Table 7 Ownership by Household Income* Percent Owning Individual Group Any Number of Households 2004 2010 2004 2010 2004 2010 2004 2010 Under $35,000 34% 31% 22% 18% 53% 42% 239 816 $35,000 $49,999 53 40 53 44 82 66 439 765 $50,000 $99,999 52 46 68 62 89 81 467 1,490 $100,000 $124,999 58 53 70 67 88 85 339 358 $125,000 and over 65 59 66 65 93 86 457 336 All households 50% 44% 52% 49% 78% 70% 2,143 3,766 *Coverage is in 2010 dollars. Ownership information from 1998 has been excluded from Table 7 and Table 8 for methodological reasons. Income is collected in broad categories to reduce the effect of consumer nonresponse. The broad income categories make it impossible to match 1998 income ranges with 2004 and 2010 categories. The Methodology section describes in detail the income classes used. 20

INSURED HIGH-INCOME HOUSEHOLDS INCREASE AVERAGE COVERAGE In 2010 most income groups carry lower average amounts of life insurance than they did six years ago. Average face amounts declined for both individual life and group life. Since households can replace income for about the same period of time as six years ago, declines in average face amounts could reflect declining U.S. household income. Similar to six years ago, households with incomes under $35,000 and incomes of $125,000 or more carry enough life insurance to replace the household s income for almost four years. Households with incomes of $100,000 to $124,999 make up the only income group to own larger amounts of individual life and group life in 2010 than in 2004. Table 8 Mean Coverage by Household Income* Individual Group Any Years of Replacement Coverage** 2004 2010 2004 2010 2004 2010 2004 2010 Under $35,000 $ 69,500 $ 67,700 $103,800 $ 68,600 $101,600 $ 79,900 3.7 3.8 $35,000 $49,999 152,000 116,900 103,800 81,900 168,800 133,400 3.4 3.4 $50,000 $99,999 267,400 235,900 143,300 138,100 274,300 250,000 3.7 3.6 $100,000 $124,999 277,000 379,700 157,400 257,500 318,100 447,200 3.1 3.9 $125,000 and over 652,200 626,900 376,000 292,400 706,200 598,600 3.9 3.7 All households $295,900 267,300 $178,500 $165,300 $312,900 $279,900 3.6 3.5 *Coverage is in 2010 dollars. Ownership information from 1998 has been excluded from Table 7 and Table 8 for methodological reasons. Income is collected in broad categories to reduce the effect of consumer nonresponse. The broad income categories make it impossible to match 1998 income ranges with 2004 and 2010 categories. The Methodology section describes in detail the income classes used. **Ratio of total insurance coverage to annual household income 21

LIFE INSURANCE OWNERSHIP BY AGE The youngest households are the least likely to own life insurance, while households between ages 35 and 64 are the most likely to be covered (60 percent versus 74 percent). But the likelihood of owning individual life has decreased for every age group in the past six years. KEY AGE GROUPS SEE HUGE DECLINES IN LIFE INSURANCE OWNERSHIP Life insurance ownership declined from 87 percent in 1998 to 73 percent in 2010 for households age 45 to 54. This was due to double-digit declines in both individual life and group life ownership. Households age 35 to 44 had the largest decline in group life ownership during the past six years. As group life ownership declined for this age segment, individual life ownership did not increase, dropping life insurance ownership to 75 percent from 82 percent. Ownership of group life increased only for households age 65 or older. In this uncertain economy, older households may be delaying retirement, thereby retaining group life coverage. Table 9 Ownership by Age of Household Head Percent Owning Individual Group Any Number of Households 1998 2004 2010 1998 2004 2010 1998 2004 2010 1998 2004 2010 Under age 35 33% 33% 29% 45% 50% 46% 62% 70% 60% 481 401 1,122 35 44 52 46 45 66 65 54 82 82 75 433 374 758 45 54 60 59 48 70 62 52 87 84 73 370 497 747 55 64 63 57 51 49 53 51 80 80 75 172 480 757 65 or older 52 60 52 27 29 40 74 77 70 187 345 382 All households 50% 50% 44% 52% 52% 49% 76% 78% 70% 1,644 2,143 3,766 22

MOST AGE GROUPS INCREASE LENGTH OF TIME THEY CAN REPLACE INCOME Average face amounts owned have increased for some age groups and declined for others in the past six years. But for most insured households, their life insurance coverage will replace household income for a longer period of time today than in 2004. Households age 35 to 44 form the only age group that experienced a decline in the average length of time households could replace their incomes declining by almost two years since 2004. (See Table 10 footnote for explanation.) The youngest households saw the largest increase in the amount of life insurance the household carries up $75,000 since 2004. Since average coverage includes insurance covering each person living in the household, this increase appears to be a phenomenon of the growth in multi- generational households as young adults delay starting their own households because they have limited job opportunities. Today, young adult households are probably more likely than in earlier times to be sharing housing with parents (whose presence increases average household life insurance coverage). Table 10 Mean Coverage by Age of Household Head* Average Coverage Individual Group Any Years of Replacement Coverage** 1998 2004 2010 1998 2004 2010 1998 2004 2010 1998 2004 2010 Under 35 $229,400 $267,600 $365,300 $130,200 $168,300 $202,800 $240,100 $254,700 $329,300 2.4 4.0 4.3 35 44 274,600 619,700 377,700 159,200 266,200 186,900 333,300 610,000 363,300 3.4 6.1 4.2 45 54 287,400 263,200 262,900 173,000 177,000 163,400 364,300 308,900 285,700 3.2 3.3 3.7 55 64 109,900 185,700 197,500 116,000 152,300 155,800 183,600 237,000 230,400 1.7 2.7 3.1 65 or older 48,500 108,500 138,400 38,100 77,100 71,100 56,300 111,700 144,400 1.1 1.6 1.9 All households $201,000 $295,900 $267,300 $139,900 $178,500 $165,300 $251,100 $312,900 $279,900 2.4 3.6 3.5 *Coverage is in 2010 dollars. **Ratio of total insurance coverage to annual household income The high average individual life face amounts for ages 35 to 44 in 2004 reflect large term policies covering some married couples. Before an inflation factor was applied to 2004 numbers, the original mean individual life coverage for ages 35 to 44 was $534,200 for individual life and $525,900 for any life. 23

LIFE INSURANCE OWNERSHIP BY HOUSEHOLD TYPE Married households, with or without children, are considerably more likely to have life insurance coverage than are those who are single. Eight in 10 married households own life insurance, while only 55 percent of single households do. LIFE INSURANCE OWNERSHIP FOR PARENTS IS AT ALL-TIME LOW Today, fewer married households with children under 18 have life insurance than ever before. This is due to large declines in ownership of both group life and individual life insurance. Ownership of individual life has declined 19 percentage points for married households since 1984, and 12 percentage points for single households since 1992. Only 57 percent of married households with children under 18 have group life coverage down 12 percentage points since 2004. Table 11 Ownership by Household Type Percent Owning Individual Group Any 1984* 1992 1998 2004 2010 1984* 1992 1998 2004 2010 1984* 1992 1998 2004 2010 Husband-wife family 70% 65% 62% 58% 51% 60% 60% 63% 62% 58% 88% 85% 86% 89% 80% With children 69 64 61 57 51 62 62 65 69 57 87 84 84 90 77 Without children 71 65 62 58 51 59 58 61 58 58 89 86 87 89 82 Not married NA 44 38 38 32 NA 42 39 38 36 NA 66 65 62 55 All households 62% 55% 50% 50% 44% 54% 53% 52% 52% 49% 81% 78% 76% 78% 70% *The 1984 information was added to this table to help illustrate the dramatic declines in ownership of individual life for the key family marketplace. NA Not available 24

INSURED FAMILIES WITH CHILDREN HAVE HIGHEST AMOUNTS OF COVERAGE Married households, especially those with children, carry more life insurance than single insured households. Life insurance coverage for both single and married households has stayed about the same since 2004 in terms of how long they could replace a primary wage earner s income. Insured married households with children carry enough life insurance to replace their income for almost six years, which is an increase of almost two years since 1998. This huge increase was made possible by the availability of low-cost term insurance for these parents. Couples without children under 18 carry enough life insurance to replace their income for 3.2 years, while single households can replace their income for only 2.5 years. Table 12 Mean Coverage by Household Type* Average Coverage Individual Group Any Years of Replacement Coverage** 1998 2004 2010 1998 2004 2010 1998 2004 2010 1998 2004 2010 Husband-wife family $255,400 $364,700 $319,200 $159,600 $199,900 $187,300 $331,500 $385,600 $334,300 3.3 4.2 4.0 With children 334,500 515,000 465,100 186,800 261,200 232,800 422,800 547,400 460,300 3.9 5.9 5.6 Without children 180,100 250,400 239,200 134,400 151,500 164,100 251,400 267,300 270,100 2.6 3.0 3.2 Not married $100,200 $132,600 $143,000 $103,200 $125,000 $112,300 $130,900 $158,500 $160,300 1.5 2.5 2.5 All households $201,000 $295,900 $267,300 $139,900 $178,500 $165,300 $251,100 $312,900 $279,900 2.4 3.6 3.5 *Coverage is in 2010 dollars. **Ratio of total insurance coverage to annual household income 25

LIFE INSURANCE OWNERSHIP BY LIFE STAGE The loss of group life insurance coverage is leaving more families with children under 18 without life insurance coverage than was the case six years ago. Parents, arguably having the greatest need for life insurance, are now less likely than couples without children to have life insurance protection. FAMILIES WITH CHILDREN ARE LESS LIKELY TO HAVE LIFE INSURANCE TODAY Today, 77 percent of young married households with children own life insurance, compared with 87 percent six years ago. This is due to large declines in ownership of group life insurance. The largest decline in ownership of individual life insurance is seen among older families with children under 18. Typically, by age 45, households with children would have financially stabilized and bought some individual life. Today, only 55 percent of older parents have any individual life coverage, down from 74 percent in 2004. Table 13 Ownership by Life Stage Percent Owning Individual Group Any Number of Households 1998 2004 2010 1998 2004 2010 1998 2004 2010 1998 2004 2010 Under Age 45 Husband-wife family 55% 47% 42% 64% 69% 59% 83% 89% 78% 549 434 1,055 With children 59 50 49 64 66 56 84 87 77 404 291 638 Without children 44 39 31 65 74 64 80 93 80 140 143 417 Not married 28 29 27 44 42 37 58 59 51 360 338 825 All households under age 45 42% 38% 36% 54% 56% 50% 71% 75% 66% 914 772 1,880 Age 45 and Over Husband-wife family 68% 65% 57% 62% 58% 57% 88% 89% 81% 471 884 1,238 With children 67 74 55 67 76 60 84 96 76 124 166 180 Without children 68 63 58 60 55 56 89 88 82 343 718 1,058 Not married 47 48 37 35 33 34 71 66 58 251 436 648 All households age 45 and over 58% 59% 50% 49% 49% 48% 80% 81% 73% 729 1,320 1,886 26

YEARS OF COVERAGE DECLINES FOR YOUNG FAMILIES AND INCREASES FOR OLDER FAMILIES In terms of the number of years life insurance will replace income, coverage increased for husband-wife families over age 45, but decreased for husband-wife families under age 45 during the past six years. The largest gains in coverage were made by older families, especially those with children, who now carry enough life insurance to replace their incomes for five years. Young families with children carry the most life insurance in terms of both average amount owned ($492,500) and the length of time they can replace their income (5.8 years). Table 14 Mean Coverage by Life Stage* Average Coverage Individual Group Any Years of Replacement Coverage** 1998 2004 2010 1998 2004 2010 1998 2004 2010 1998 2004 2010 Under Age 45 Husband-wife family $310,300 $565,000 $459,900 $159,500 $247,300 $231,800 $368,000 $522,900 $423,200 3.9 5.9 5.0 With children 338,400 602,700 520,600 173,000 278,900 239,100 403,700 606,400 492,500 4.1 6.8 5.8 Without children 207,200 432,300 302,000 120,100 160,300 222,000 258,800 312,300 316,300 3.3 3.6 3.7 Not married $128,400 $163,300 $193,600 $126,200 $140,600 $119,800 $168,600 $182,400 $193,400 1.7 3.0 2.8 All households under age 45 $257,000 $448,000 $372,200 $146,700 $211,900 $195,100 $290,900 $403,800 $346,300 2.8 4.9 4.2 Age 45 and Over Husband-wife family $210,200 $241,200 $243,000 $159,700 $162,700 $153,300 $299,800 $280,100 $271,200 2.6 3.0 3.3 With children 323,900 341,300 324,700 224,900 223,500 215,300 479,700 402,300 365,300 3.3 3.6 5.1 Without children 173,900 214,500 228,000 138,800 148,600 141,600 249,400 250,000 255,100 2.4 2.8 3.0 Not married $ 85,200 $105,700 $107,400 $ 75,000 $107,100 $104,500 $101,700 $130,200 $132,300 1.4 2.0 2.2 All households age 45 and over $161,300 $201,500 $205,800 $133,200 $149,300 $140,300 $217,900 $236,400 $230,000 2.0 2.7 3.0 *Coverage is in 2010 dollars. **Ratio of total insurance coverage to annual household income The high average individual life dollar amount for young families with children in 2004 reflect large term policies covering some married couples. Before applying an inflation factor to 2004 averages, the original mean individual life coverage for young families with children was $519,600 for individual life and $522,800 for any life. 27

LIFE INSURANCE OWNERSHIP BY REGION Life insurance ownership differs across the four major census regions. Households in the South and Midwest are more likely to own group life insurance than individual life insurance. Households located in the Northeast are the most likely to have individual life insurance, and households in the West are the least likely to have any life insurance coverage. WESTERN HOUSEHOLDS LEAST LIKELY TO OWN INDIVIDUAL LIFE INSURANCE Ownership of individual life insurance held steady in the West while declining in households across the rest of the country. But only about one third of households located in the West have individual life the lowest rate in the nation. Westerners also are less likely than people in the rest of the country to own group life insurance, probably because more students, more self-employed households, and more business owners reside in this region. Table 15 Ownership by Region Percent Owning Individual Group Any Number of Households 1998 2004 2010 1998 2004 2010 1998 2004 2010 1998 2004 2010 Northeast 53% 55% 48% 54% 52% 48% 77% 76% 71% 315 442 899 Midwest 57 55 43 60 56 55 83 81 73 395 540 1,086 South 51 51 46 52 54 52 77 80 73 541 734 1,076 West 38 36 36 40 45 40 65 71 61 391 424 705 All households 50% 50% 44% 52% 52% 49% 76% 78% 70% 1,644 2,143 3,766 28

WEST HAS LARGEST INCREASE IN AMOUNT OF COVERAGE After adjusting for inflation, households in all parts of the United States are better insured today than in 1998, but the West experienced the largest increase in average coverage. The West is the only region where the average amount of life coverage has increased since 2004. This was due to a large increase in the average amount of group life owned. The Northeast showed the largest declines in individual life coverage in the past six years more than three times the decreases seen in the West and Midwest. Table 16 Mean Coverage by Region* Average Coverage Individual Group Any 1998 2004 2010 1998 2004 2010 1998 2004 2010 Northeast $174,100 $326,800 $223,000 $127,300 $216,300 $142,000 $233,400 $355,800 $252,600 Midwest 186,300 253,600 218,900 131,100 139,000 144,100 234,200 271,900 241,200 South 227,000 298,600 306,900 137,900 194,200 162,200 270,400 331,300 298,300 West 200,200 327,700 310,700 173,100 173,500 229,400 254,200 294,300 327,500 All households $201,000 $295,900 $267,300 $139,900 $178,500 $165,300 $251,100 $312,900 $279,900 *Coverage is in 2010 dollars. 29

ADEQUACY OF LIFE INSURANCE COVERAGE By their own assessment, half of U.S. households (58 million) believe they need more life insurance. In just six years, the ranks of the underinsured have grown by 10 million households. NUMBER OF UNDERINSURED HOUSEHOLDS GROWS Half of U.S. households say they do not have enough life insurance the highest proportion ever. Similar to 2004, one fourth of all U.S. households think they might buy life insurance in the next 12 months. But among underinsured households, fewer plan to buy soon than did in 2004 (37 percent versus 45 percent, respectively) (Table 17). To be adequately insured, households would like to be able to replace their income for an average of 6.2 years, but actually own only enough to replace income for 3.5 years a gap of two and half years of household income. Figure 5 Trends in Need for Life Insurance and Future Purchase Intentions 50% 42% 39% 44% 23% 32% 27% 25% Needs more life insurance Likely to buy in next 12 months* 1992 1998 2004 2010 *Includes Very and Fairly likely to buy in the next 12 months. 30

PARENTS AND HOUSEHOLDS UNDER AGE 45 MOST PRIMED TO BUY Twenty-nine million U.S. households think they might buy life insurance in the next 12 months. Having children under age 18 in the household is still a prime indicator that the household is considering buying soon, but many will not take the necessary steps to purchase the coverage they say they need. The younger the household, the more likely it is to be underinsured and to be thinking about buying life insurance in the next 12 months. Parents are as likely to admit they are underinsured as they did six years ago, but they are less likely to be planning to buy life insurance to rectify the situation. Buying life insurance appears to be one more decision families are willing to delay as they struggle in the current economy. Even among households with life insurance, many believe they are inadequately insured 50 percent with only group life, 42 percent with only individual life, and 35 percent with both. Thirty-seven percent of underinsured households plan to buy in the next 12 months, down from 45 percent in 2004. Table 17 Need for Life Insurance and Future Purchase Intentions by Demographics Needs More Likely to Buy* 2004 2010 2004 2010 Age of Household Head Under age 35 59% 56% 44% 36% 35 44 49 56 34 34 45 54 49 56 25 26 55 64 34 43 14 16 65 or older 18 32 2 5 Household Income Under $35,000 57% 65% 26% 26% $35,000 $49,999 46 57 27 25 $50,000 $99,999 42 47 28 26 $100,000 $124,999 46 39 28 27 $125,000 and over 32 27 28 19 Marital Status Married with children 56% 58% 43% 34% Married no children 38 42 18 19 Not married 43 53 25 26 Types of Life Insurance Coverage Individual only NA 42% NA 23% Group only NA 50 NA 26 Both NA 35 NA 23 Neither 60 66 26 27 Households Saying They Need More 100% 100% 45% 37% Insured households 40% 43% 27% 24% All households 44% 50% 27% 25% *Includes Very and Fairly likely to buy. NA Not available 31

MANY HOUSEHOLDS WITH CHILDREN NOT PREPARED FOR PREMATURE DEATH Seven in 10 married households with children under age 18 could meet everyday living expenses only for a few months if a primary wage earner died. Households with no life insurance coverage and low-income households are the most financially vulnerable if a wage earner dies. It is only after reaching age 55 that at least half of the households are able to cover living expenses well into the future if a wage earner dies. This could be because older households usually have accumulated more assets that can be used to give the family time to financially adjust to a decrease in income. Even with insurance, one in four insured households would struggle immediately to pay everyday living expenses if a wage earner dies. Table 18 Family s Financial Situation If Primary Wage Earner Dies How Long Household Can Cover Everyday Living Expenses Immediate Trouble Several Months Well Into the Future Age of Household Head Under age 35 42% 34% 24% 35 44 40 31 29 45 54 36 31 33 55 64 23 27 50 65 or older 16 16 68 Household Income Under $35,000 67% 21% 12% $35,000 $49,999 44 29 27 $50,000 $99,999 27 33 40 $100,000 $124,999 14 33 53 $125,000 and over 10 27 63 Marital Status Married with children 35% 36% 29% Married no children 23 26 51 Not married 51 27 22 Types of Life Insurance Coverage Individual only 28% 35% 37% Group only 29 37 34 Both 18 28 54 Neither 59 18 23 Households Saying They Need More 49% 35% 16% Insured households 25% 33% 42% All households 34% 29% 37% 32

HOUSEHOLDS DELAY BUYING LIFE INSURANCE FOR MANY REASONS One 1 in 4 U.S. households are primed to buy life insurance: They believe they will buy life insurance in the next 12 months. Many will not follow through; we know that only about 1 in 10 households actually buy life insurance in any given year. Why don t they take action and purchase the life insurance coverage they believe they need? The top reason U.S. households delay purchasing life insurance is that it has low priority compared with other financial goals. More than half of households feel that life insurance will be too expensive for them; they may simply need to be educated about the low cost of term life insurance. Forty-four percent of U.S. households feel they already have enough insurance, and 42 percent prefer to put money in other financial products. Households considering buying life insurance need help deciding what to purchase. More than half don t know what type to buy or cannot decide how much to buy. For those who think they might buy life insurance in the near future, procrastination is a problem. Fifty-four percent of them just haven t gotten around to it, 39 percent don t feel they ve received any information relating to their life insurance needs, and 35 percent seem to be waiting for someone to approach them. This indicates that even those who think they might buy life insurance in the next year will not seek it out on their own. Table 19 Reasons Households Have Not Bought More Life Insurance Need More Households That Likely to Buy* Insured Households All Households Money Issues Other financial priorities 79% 77% 61% 64% Can t afford 79 68 48 55 Prefer to put my money in other financial products 37 42 41 42 Decision-Making Challenges Difficult to know what type to buy 47% 56% 35% 36% Difficult to decide how much to buy 44 56 35 35 Worry about making the wrong decision 39 50 28 29 Procrastination To avoid high-pressure sales tactics 44% 53% 38% 38% Just haven t gotten around to it 40 54 25 28 Have not received info that relates to my needs 28 39 19 22 No one has approached me 25 35 17 20 Unpleasant to think about dying 23 34 16 18 Have Enough Insurance to Meet My Needs NA NA 54% 44% Do Not Need Life Insurance NA NA 22% 27% *Includes Very and Fairly likely to buy. NA Not applicable 33

MANY INSURED HOUSEHOLDS WANT TO REVIEW LIFE INSURANCE FREQUENTLY Forty-four percent of insured households want someone to contact them to review their life insurance coverage and policies at least every five years. And almost one third want a review every couple of years. Half of insured households would rather initiate contact themselves when they are ready to review their coverage. Insured households under age 45, parents, and middle-market households are more likely to want someone to contact them and offer to review their life insurance coverage at least every five years. Older households, low-income and high-income households would rather initiate contact themselves when they are ready to review their life insurance coverage or policies. Table 20 How Often Insureds Prefer to Review Life Insurance Coverage Once a Year 1 to 2 Years 3 to 5 Years 6 Years or More At My Request Age of Household Head Under age 35 16% 19% 19% 6% 40% 35 44 19 16 17 4 44 45 54 17 13 12 3 55 55 64 16 11 8 4 61 65 or older 11 11 9 3 66 Household Income Under $35,000 16 11 9 4 60 $35,000 $49,999 18 15 16 3 48 $50,000 $99,999 17 16 13 5 49 $100,000 $124,999 13 16 18 3 50 $125,000 and over 11 14 12 4 59 Marital Status Married with children 18 15 20 3 44 Married no children 15 13 12 4 56 Not married 16 16 11 4 53 Households Saying They Need More 18 15 14 4 49 Insured households 16 15 13 4 52 34

INTEREST IN FINANCIAL PRODUCTS AND SERVICES DECLINES Only 44 percent of all U.S. households and 54 percent of married households with children under 18 want to speak with financial professionals about financial services or products. Families may be delaying making any financial decisions during these tough economic times. Compared with 2004, households are considerably less willing to speak with professionals about retirement needs or lifetime income plans, life insurance, disability coverage, or education savings. Overall, there is no one financial product or service that U.S. households most want to speak with financial professionals about. A greater proportion of married households with children than other households want help with various financial activities. At least 1 in 4 married households would like to speak with financial professionals about retirement needs, lifetime income plans, life insurance, savings plans for children s education, and disability income plans. Financial advisors are consumers top choice for most financial activities. Insurance agents and brokers are among the top choices for insurance needs such as life insurance, disability income insurance, critical illness insurance, long-term care insurance, and auto or homeowners insurance. Table 21 Financial Activities for Which Households Want Help From Professionals Who Should Provide Help With Financial Activity All Households Married With Kids Insurance Agent/Broker Financial Advisor Bank Professional Other Professional 2004 2010 2004 2010 Review retirement needs 37% 19% 47% 25% 16% 76% 24% 10% Plan to provide lifetime income after I retire 34 18 46 24 34 73 12 13 Plan if I or spouse becomes disabled 27 18 41 25 52 58 9 13 Plan to provide financial help if I or spouse die 29 16 45 25 51 62 9 12 Savings strategy 16 20 7 74 41 11 Long-term nursing care plan for me or my spouse 20 15 25 21 63 48 5 12 Investing strategy 14 16 9 90 19 12 Debt reduction 12 20 8 75 27 19 Critical illness insurance 12 17 72 31 6 12 Estate planning 23 11 26 14 16 71 11 35 Plan to save money for children s education 22 10 44 27 15 79 23 11 Auto or homeowners insurance 15 9 19 14 89 19 4 6 Not asked in 2004 35

TRUST INFLUENCES THE BUYING DECISION Trust is the key element consumers require to buy life insurance. Half of U.S. households say they are more likely to buy if the sales representative is someone they trust. On the other hand, the action most likely to derail a sale is pushing to close the sale at the first meeting: Fifty-eight percent of households say they are unlikely to buy if the sales representative wants them to buy at the first meeting. Consumers expect sales representatives to establish relationships before trying to sell them policies. The actions that most positively influence consumers decisions to buy life insurance are working with trustworthy sales representatives: dealing with sales representatives who are recommended by people they trust, buying at their workplaces, obtaining reviews of their households life insurance needs, seeing life insurance presented as part of a total financial plan, and meeting face-to-face. A significant proportion of consumers say they are less likely to buy if the sales representative pushes to close the sale at the first meeting, the whole sales process is conducted on the Internet, or the offer comes in the mail even if it is from someone with whom they have done business before. Figure 6 Influences on the Life Insurance Buying Decision Trust sales representative 50% 44% 6% Sales rep recommended to me 40% 54% 6% Can buy at place of work 35% 57% 8% Sales rep reviews/analyzes needs 33% 57% 10% Presented as part of financial plan 32% 59% 9% Meet face-to-face 30% 58% 12% Whole process done on Internet 19% 60% 21% Mail offer 17% 63% 20% Rep wants me to buy at first meeting 3% 39% 58% More likely No influence Less likely 36

METHODOLOGY LIMRA s U.S. Life Ownership study serves as a resource for monitoring long-term patterns in life insurance ownership. The 2010 survey results are based on 3,766 households with 9,390 household members. We asked the person most involved in making decisions about finances, investments, and life insurance to complete the questionnaire. Data Collection Fieldwork was conducted in the second quarter of 2010. Participants were selected from the Harris Online Panel and received email invitations and several reminders that contained hyperlinks to the survey Web address. Respondents received standard panel incentives for participation as well as entry in a drawing for a prize of $10,000. Completion of the survey took 25 minutes on average. Weighting The 2010 U.S. Ownership Study was weighted to bring the sample as close as possible to U.S. Census Bureau population figures to ensure that the sample represented the U.S. population age 18 and older. Demographic factors used in weighting included the respondent s age, household income, gender, education, investable assets, race, and region. A propensity weight was applied to correct for attitudinal and behavioral biases associated with being online versus offline. Dollar Figures All dollar figures in this report are in 2010 dollars unless otherwise noted. An inflation factor of 1.16 (based on the consumer price index) was applied to 2004 data, and an inflation factor of 1.34 was applied to 1998 data. Very high face amounts and very low face amounts reported by consumers for individual life insurance and group life insurance that the household owned were adjusted to eliminate the effect of extreme outliers. The lowest 1 percent and the highest 1 percent of reported face amounts were eliminated from the mean calculations of average amounts owned for individual life, group life, and total life insurance. Sample Respondent quotas were established for 30 different age-income segments to obtain a large enough sample to analyze life insurance ownership for each group. Table A-1 summarizes the target quota, number of surveys completed, and final number of usable surveys for each age-income segment. Table A-2 shows the sample size for specific demographic groups. 37

Table A-1 Survey Quota Groups and Numbers of Completed Questionnaires Target Quota Original Number Completed Usable Number Completed Age 18 24 and HH income under $35,000 80 137 130 Age 18 24 and HH income $35,000 $49,999 80 87 83 Age 18 24 and HH income $50,000 $74,999 80 84 78 Age 18 24 and HH income $75,000 $99,999 80 59 51 Age 18 24 and HH income $100,000 and over 80 41 36 Age 25 34 and HH income under $35,000 160 163 149 Age 25 34 and HH income $35,000 $49,999 160 164 153 Age 25 34 and HH income $50,000 $74,999 160 166 156 Age 25 34 and HH income $75,000 $99,999 160 163 149 Age 25 34 and HH income $100,000 and over 160 163 136 Age 35 44 and HH income under $35,000 160 164 152 Age 35 44 and HH income $35,000 $49,999 160 162 153 Age 35 44 and HH income $50,000 $74,999 160 166 151 Age 35 44 and HH income $75,000 $99,999 160 163 150 Age 35 44 and HH income $100,000 and over 160 164 152 Age 45 54 and HH income under $35,000 160 164 153 Age 45 54 and HH income $35,000 $49,999 160 161 148 Age 45 54 and HH income $50,000 $74,999 160 164 149 Age 45 54 and HH income $75,000 $99,999 160 160 146 Age 45 54 and HH income $100,000 and over 160 165 151 Age 55 64 and HH income under $35,000 160 163 152 Age 55 64 and HH income $35,000 $49,999 160 161 152 Age 55 64 and HH income $50,000 $74,999 160 163 156 Age 55 64 and HH income $75,000 $99,999 160 163 149 Age 55 64 and HH income $100,000 and over 160 161 148 Age 65 and older and HH income under $35,000 80 88 80 Age 65 and older and HH income $35,000 $49,999 80 86 76 Age 65 and older and HH income $50,000 $74,999 80 82 76 Age 65 and older and HH income $75,000 $99,999 80 80 79 Age 65 and older and HH income $100,000 and over 80 82 71 TOTAL 4,000 4,089 3,766 38

Table A-2 Demographic Distribution of 2010 and 2004 Survey Samples 2010 Unweighted Numbers 2004 Unweighted Numbers All Households 3,766 2,143 Household Income Under $35,000 816 239 $35,000 $49,999 765 439 $50,000 $99,999 1,490 467 $100,000 $124,999 358 339 $125,000 and over 336 457 Respondent Age 18 24 379 25 34 743 401* 35 44 758 374 45 54 747 497 55 64 757 480 65 and older 382 345 Investable Assets Under $25,000 1,477 557 $25,000 $99,999 850 357 $100,000 $499,999 643 565 $500,000 and over 310 302 Family Status Married with children 818 465 Married without children 1,475 876 Not married 1,473 791 Respondent Gender Male 1,842 1,095 Female 1,924 1,034 Region Northeast 899 442 Midwest 1,086 540 South 1,076 734 West 705 424 *The youngest two respondent age groups were combined as 18 34 in 2004. 39

Terminology Individual life includes policies purchased through agents and companies, fraternal organizations, direct response, banks, and associations. It also includes savings bank life insurance (SBLI) sold in Connecticut, Massachusetts, and New York. Face-to-face distribution is limited to individual policies purchased through face-to-face meetings with insurance agents, brokers, and other financial professionals. This category was referred to as agent-sold life in prior studies, since nonagent sales represented a very small percentage of this category. The name has been changed to reflect the growing presence of other professionals. Group life includes life insurance obtained through employers and labor unions. Any coverage includes individual life insurance, group life insurance, and/or veterans or servicemen s life (SGLI and/or VGLI). Children are any dependent individuals under age 18. Household Income Table A-3 illustrates the structure of the five household income classes used in trending data between 2004 and 2010. Data on household income were collected through categorical income ranges in 2004 and 2010. It is not possible to match these income categories exactly. However, to provide a basis for comparing data across the two studies, we grouped households to create a similar distribution of households across income categories. The five income categories shown in Table A-3 represent the closest match of income distributions that can be obtained from the two studies. Table A-3 Household Income Distributions in 2004 and 2010 2004 2010 Original Income Classes Inflated to 2010 Dollars Percent of Households Current Income Classes Percent of Households Under $35,000 Under $40,600 30% Under $35,000 25% $35,000 $49,999 $40,600 $57,999 14 $35,000 $49,999 17 $50,000 $74,999 $58,000 $86,999 34 $50,000 $99,999 35 $75,000 $99,999 $87,000 $115,999 10 $100,000 $124,999 12 $100,000 or more $116,000 or more 12 $125,000 or more 11 100% 100% 40

RELATED LINKS The following links are valid as of 10/8/10. LIMRA Life Insurance in a Tough Economy (2010) This report explores consumers current life insurance situations, why they resist opportunities to buy, and what can be done to better engage consumers regarding their life insurance needs. http://www.limra.com/members/abstracts/other/10397s.pdf The Facts of Life and Annuities September Update (2010) This fact book on life insurance and annuities can be used to help educate people about the value the industry brings to the U.S. economy and how our products and services can change lives. http://www.limra.com/members/abstracts/execsum/10004exec.pdf The Financial Protection of Generations X and Y (2010) This report looks at the financial goals of Gen X and Gen Y, along with their attitudes toward life insurance, life insurance companies, and financial professionals. http://www.limra.com/members/abstracts/reports/10568.pdf Improving Sales Presentations: Using Choice Architecture to Influence Buying Decisions (2009) This study explores how choice architecture (behavioral economic principles) can be incorporated into sales presentations to help prospects make better financial decisions. It discusses how to present products and advice to potential buyers of insurance. http://www.limra.com/members/abstracts/reports/10227.pdf U.S Individual Life Sales Trends 1975 2009 (2010) This report shows industry estimates of individual life insurance sales in the United States. Overall results are displayed by annualized, planned recurring and single premium, face amount and policy sales. Premium market share is also displayed by product and distribution channel. http://www.limra.com/members/abstracts/reports/1746.pdf 41

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