Term Life Insurance Sales: What Is Driving the Surge?

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Authors

Karen R. Terry, FLMI
Assistant Vice President, Insurance Product Research
LIMRA and LOMA

Nancy Moussa, ALMI
Associate Research Director Insurance Product Research
LIMRA and LOMA

December 2024

Term life insurance has long been viewed as the most affordable life insurance product on the market. This past summer, LIMRA surveyed term carriers for a more in-depth look at what is driving trends in this market.

Term life insurance sales have steadily increased over the past 10 years and were 25 percent higher in 2023 than they were at the beginning of the decade (Figure 1). Annualized premium reached $3 billion in 2021 as online availability, simplicity and affordability made term a common solution to the increased consumer demand brought on by the pandemic. While sales dropped in 2022, as consumer demand started to fade and economic concerns grew, growth quickly returned in 2023 thanks to carrier actions, including pricing improvements and product enhancements, as well as digital platform and underwriting expansion.

Figure 1. Term Life Annualized Premium Sales

2013 to 2023

Source: LIMRA’s U.S. Individual Life Insurance Sales survey and LIMRA estimates, 2013 – 2023.

Based on producer input, income replacement and life change events tend to be the top reasons to buy term insurance today. Term’s lower premiums make the product more affordable than other products. Combined with life events that more frequently happen at earlier ages, this leads to a younger market compared to products like indexed universal life (IUL) or whole life. The sweet spot for term sales is between ages 35–44. This cohort makes up a quarter of the annualized premium, 30 percent of policy sales and 38 percent of total face amount. The average policy size is nearly $154,000 higher than the next largest age band.

Selling More Term

Given term insurance caters to a more price sensitive audience, carriers may need to reprice their products more frequently to position themselves advantageously in a saturated market. Fifty-eight percent of companies confirmed they hadn’t repriced their term products in 2023. Of those that did reprice, 79 percent of companies who decreased their premiums experienced a material increase in sales and/or an increase in competitive ranking.

Figure 2. Effect of Lower Term Life Premiums

Source: A Deeper Dive: 2023 Term Life Insurance Sales, LIMRA.

Competitive premiums are also part of the strategy for companies to get more advisors to actually sell insurance — more specifically, term insurance. Sixty-two percent of carriers mentioned lowering rates as a way to get more advisors to sell term insurance. Service and pay are also important as 38 percent of companies provide an online platform, and 17 percent increased commissions in an effort to get more advisors to sell term.

An Easier Process

Term carriers also continue to work on making the sales process faster and simpler. Accelerated underwriting has gained popularity in recent years in the term insurance space. While the majority of companies have implemented some form of accelerated underwriting risk assessment tools, 57 percent of these carriers set targets for how much of their business they would like to go through this process. Forty-eight percent cited having a target between 25 percent and 50 percent of their submitted business using this underwriting model.

It is worth noting that the length of time from application submission to decision differs by almost 16 days if a policy is issued accelerated versus nonaccelerated.

Lastly, since accelerated term business foregoes medical exams or certain requirements that were once thought necessary to place term business, we asked carriers if they reinsure their accelerated term business any differently than fully underwritten policies. Of the 26 carriers who issue accelerated term business, 77 percent of companies said there is no difference in reinsuring accelerated versus non-accelerated policies, while 23 percent said they reinsure their accelerated term business differently.

Looking Ahead

Regulatory, market and consumer trends will inevitably continue to impact term insurance in the next few years. In fact, 64 percent of survey participants cited higher interest rates and inflation, in addition to emphasizing the importance of accelerated underwriting, simplified underwriting and instant issue as the main factors to impact term sales.

Carriers are essentially split between whether they expect industry term sales to increase moderately or remain flat in 2025. However, when it comes to their own term sales, 67 percent believe they will have at least a moderate increase in sales, while 24 percent believe their company sales will remain flat. As we approach the end of 2024, LIMRA is expecting low, but positive yearly growth through 2027.

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