First Command Financial Behaviors Index: Americans Maintaining Life Insurance Through Economic Turmoil

While the economy appears to be dragging down life insurance sales, middle-class Americans are hanging onto their personal policies and preserving protection in an uncertain financial environment, according to the First Command Financial Behaviors Index.

The August survey of the First Command Financial Behaviors Index reveals that four percent of Americans report making changes to their personal life insurance coverage as a result of the economy. Of those who made changes, 42 percent increased, 29 percent decreased and 17 percent eliminated coverage.

These results stand as an encouraging counterpoint to this year's downward trend in life insurance sales. Individual life insurance annualized premiums dropped 23 percent in the first six months of 2009 for the steepest six-month decline since 1942, according to an Aug. 31 release by LIMRA International, Inc., a Windsor, Conn.-based research and consulting company.

"We are encouraged and relieved to see that middle-class consumers are not reacting to the economic turmoil by sacrificing their life insurance coverage," said Scott Spiker, CEO of First Command Financial Services, Inc. "Canceling policies to save money during tough times is a move fraught with financial peril. Life insurance serves as a safety net that catches a family when tragedy strikes."

In related findings, the August survey revealed that three percent of respondents reported that their employer has made changes to their life insurance coverage through work as a result of the economy. Of these individuals, 70 percent reported that their coverage has been decreased. Also, 34 percent of respondents felt extremely or very comfortable with their life insurance coverage, down slightly from 40 percent in February 2008. Comfort levels were considerably higher among consumers who work with a financial planner; 43 percent of respondents engaged with a financial planner felt extremely or very comfortable with their life insurance coverage, compared to only 31 percent of respondents not currently engaged with a financial planner.

First Command surveyed consumers on their life insurance coverage as part of its September observance of Life Insurance Awareness Month, which was created by the LIFE Foundation in response to growing concern about the large number of Americans who lack adequate life insurance protection. According to LIMRA International, 68 million adult Americans have no life insurance, and most with coverage have far less than most experts recommend.

"Life insurance helps consumers feel more confident in their financial future," Spiker said. "Our research and experience reveals that feelings of financial security increase when life insurance is sufficient to cover family debt and family income until retirement. Having the appropriate amount of life insurance can provide a significant lift in feelings of financial security for American families."

Compiled by Sentient Decision Science, the First Command Financial Behaviors Index assesses trends among the American public's financial behaviors, attitudes and intentions through a monthly survey of approximately 1,000 U.S. consumers aged 25 to 70 with annual household incomes of at least $50,000. Results are reported quarterly. The margin of error is +/- 3.1 percent with a 95 percent level of confidence.

Sentient Decision Science was commissioned by First Command to compile the Financial Behaviors Index. Sentient is a full-service market research firm with special vertical expertise within the financial services industry.