The Social and Economic Contributions of the Life Insurance Industry

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The life insurance industry provides nearly $4 trillion of investment that fuels growth and provides vital stability to the U.S. economy while also delivering financial security to millions of American households, according to a new study.

Life insurance is a vital component of the U.S. economy. It plays a unique role not only in the safety and security provided to individuals, but in the stability of financial markets and growth of the overall economy. Life insurers’ liabilities are long-term in nature and an ideal funding source for long-term projects.

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Highlights from “The Social and Economic Contributions of the Life Insurance Industry”

Key provider of financial protection for American families

  • 60 percent of U.S. households are covered by some form of life insurance
  • $20.1 trillion of financial protection in force in 2014; equivalent to 116 U.S.% GDP
  • $774 billion in life insurance, annuity and disability payments from 2010 to 2014, an amount equal to 20 percent of Social Security payouts during the same period
  • Annuities are the only financial product that provides a guaranteed lifetime income stream in retirement

Vital source of market stability

  • Life insurance investments are long term to match long dated obligations
  • 70% of bonds held by life insurers have a maturity of
    10 years or more
  • 96% have a maturity of five years or more – only 28%
    of commercial bank assets have a maturity greater than
    five years
  • “Buy and hold” investment approach provides stability to markets during financial downturns

Fuels economic growth

  • $3.8 trillion in direct assets, a source of patient capital
    for infrastructure, manufacturing and real estate
  • 1% increase in ratio of life insurance premiums to
    GDP = $26 billion increase in GDP
  • Transforms household savings into long-term
    productive investment
  • Source of patient capital for infrastructure, real estate
    and manufacturing

Personal financial protection

  • Without life insurance, 33 percent of families who lose a breadwinner suffer a severe drop in living standards; with
    life insurance, only 6 percent do
  • Annuities provide a healthy 65-year-old a 16 percent increase in household wealth
  • $700 in life insurance premiums buys a 40-year-old $300,000 in 20-year term life, while self-insurance would require saving $9,000 a year (with five percent annual return) for 20 years to reach the same level of coverage

Benefits to the Economy

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Benefits to the Individual

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