U.S. life insurance companies paid out a record high of nearly $200 billion last year, according to a new report.
According to data released by the American Council of Life Insurers (ACLI), companies paid about $100 billion to life insurance policy beneficiaries and another $97.7 billion to annuity holders in 2021. That's the highest payout total ever recorded for a single year.
Life insurance payments increased nearly 11% from 2020 to 2021, according to the ACLI. The increase follows a 15% year-to-year increase from 2019 to 2020, which was the biggest jump since the 1918 flu pandemic.
Andrew Melnyk, ACLI’s vice president and chief economist, said Americans purchased nearly 46 million life insurance policies in 2021, a 6% increase from the previous year. Life insurance coverage surpassed $21 trillion, another record-breaker.
While the report does not provide causes of death for their policyholders, the trade association said COVID-19 is likely a driving factor of the record-breaking numbers.
A whopping 1.09 million Americans have died from the virus since its onset, with approximately 460,000 of those deaths occurring in 2021, according to the Centers for Disease Control and Prevention. COVID-19 was the third-leading cause of death in the U.S. behind heart disease and cancer.
Do you need life insurance?
Even if you’re young, healthy and have no dependents, you may want to consider buying life insurance. The younger you are, the cheaper premium rates are likely to be, and depending on your policy, you could also earn interest.
Life insurance offers tax-free financial protection after your death, whether it’s paying off your outstanding debts or providing an income stream to your beneficiaries. Your main options are term life insurance, which covers you for a limited period of time, or whole life insurance, which is permanent. The type of life insurance you pick will determine how much the monthly payments cost, how long the policy lasts and whether it builds cash value.
Whole life lasts your entire lifetime and earns interest over time, but the monthly payments for this option are higher. The younger you are, the more cash value your whole life insurance policy will build, and you can use that interest to cover premium payment or borrow it (and pay it back with interest) in the event of an emergency.
You can select a term life insurance policy with coverage from 10 to 30 years. These policies are more affordable, more flexible and easier to navigate, but they don’t earn additional cash value. Once the term of the policy ends, so does your coverage.