A report showed a slow rate of consumer spending had a negative impact on the face amount of life insurance policies last year, especially when considering term life insurance.
The A.M. Best Company conducted its statisical study of life insurance policies handed out in 2010, finding their total amount declined 3.1 percent year-over-year to $2.87 trillion. The rate of decline was particularly significant for term life insurance policies, which dropped 11.7 percent to $1.13 trillion last year.
Analysts with A.M. Best noted the industry did experience some rate increases, but consumers may have simply purchased less life insurance to deal with tight economic conditions.
Additionally, whole life insurance policies remained in high demand.
"We saw an increase in whole life and universal life sales due to consumer's demand for cash value policies, as well as universal life with no-lapse guarantees," said Andrew Edelsberg, a vice president in the life/health division at A.M. Best.
The recent economic downturn had some consumers cutting their policy benefits to save money. However, under-insuring a person could leave their family vulnerable in the event of an unfortunate incident.