The U.S. life insurance market is massive as well as highly competitive, with over 700 life insurance companies operating in this insurance business in the United States. These companies sell the vast majority of life insurance plans in the country, which are designed to support a comprehensive investment strategy. Based on the revenue, Life Insurance & Annuities industry market size in 2019 is $854.8bn and is further expected to increase by 1.6%. The Life Insurance sector in the U.S. plays a significant role in the country’s economy and the insurance companies of the U.S. employed around 2.7 million people in all of their branches.
A Life insurance is a vital financial tool that allows individuals to provide financial security to their family and loved ones after their death. Therefore, individuals having dependent family members should seriously look to obtain best life insurance plan that will financially support their surviving family members. However, there is no fixed amount of life insurance one needs to obtain because it primarily depends upon the dependents one have along with any charitable cause to support. Life insurance plans are generally obtained by the individuals to help their family members after their death on several financial matters such as paying bills, managing living expenses, paying education fees etc.
Individuals enrolling in the life insurance plans need to pay either monthly, quarterly, semi-annually or annually premiums to insurance company and in exchange the company pay a lump sum amount to a designated beneficiary upon their death. The life insurance plans are usually availed by individuals considering the potential future expenses that their loved ones may need. There are different types of life insurance plans available in the U.S. ranging from affordable basic coverage to complex plans, which are designed to cater the needs of different individuals.
Life insurance policies in the U.S. are generally of the following two types:
Whole Life Insurance Policies
These are termed as permanent policies which remain effective as long as insured pay the premium amount. Besides paying benefit to a designated beneficiary upon the death of the insured, whole life insurance policies also have an investment or saving component. This allow insured to accumulate cash over the term of the policy, so when required insured can borrow money from these policies. The Whole life insurance policy is a good option for individuals who wish to have coverage for their entire life, want the same premium amount throughout the plan duration and prefer a guaranteed return on the accumulated cash that builds up within the policy tenure. The best thing about Whole life insurance policy is that it doesn’t expire and remain effective as long as insured pay the premium amount. On the cash value investment component, the insured get a guaranteed rate of return along with the fixed amount of the death benefit. The only downside of this plan is that it is a very expensive way to buy life insurance. Different types of Permanent Life Insurance Policies:
Whole or Ordinary Life Insurance Plan – This is the most common life insurance plan that offers a death benefit and a saving account. People buying this life insurance plan have to pay a certain premium amount on a regular basis to receive a specific death benefit. The savings element of the plan grow depending upon the dividends paid by the company to the insured.
Universal or Adjustable Life – This type of life insurance plan offers more flexibility as insured are able to increase their death benefit if they pass a medical examination. The savings element of the plan generally earns a market rate of interest. After accumulation of the money in the account, the insured have the option to change their premium, provided the account has enough money to cover the costs. However, insured need to keep in mind that if they reduce their premium amount and the accumulated amount get used up then the policy might lapse and their coverage will end.
Variable Life – This life insurance plan is combination of death protection along with a savings account, which the insured can invest in stocks, bonds and mutual funds. In this plan the policy value may quickly grow but this plan has more risk too. If the investments of the insured do not perform well then their cash value as well as death benefit decreases. However, some of the plans guaranteed that the death benefit of the insured will not fall below a minimum level.
Variable-Universal Life – This life insurance plan comes with the feature of both Variable and Universal life policies. The insured have the investment risks as well as reward characteristics of Variable life insurance coupled with the option of adjusting their premium and death benefit, which is feature of Universal life insurance.
Major Life Insurance Companies of U.S.
Some of the major companies actively participating in the life insurance sector of the U.S. include:
- MetLife/Brighthouse Financial
- Northwestern Mutual
- New York Life
These are the four largest life insurance companies functioning in the United States having at least 5% of the market. Besides these, some of the other prominent Life Insurance Companies are:
- Lincoln National
- John Hancock