Shift to Wealthier Clientele Puts Life Insurers in a Bind

[mahatmakanejeeves]

Shift to Wealthier Clientele Puts Life Insurers in a Bind

By MARK MAREMONT And LESLIE SCISM

....
High-end policies for $2 million and up, which can carry annual premiums of $20,000 or more, made up nearly 40% of the face value of new whole-life and universal-life policies sold in 2007, according to an analysis done for The Wall Street Journal by Limra, an industry-funded research group. Such large policies accounted for just 10% a decade earlier, and 1% two decades ago.
....

Permanent life insurance has "become a tax shelter for the rich," said Charlie Smith, a former head of an international association of insurance managers, who in 2003 to 2005 was chairman of an insurance-industry task force on flagging middle-market sales. "If the industry no longer has a significant presence on Main Street, it loses its political clout in Congress and can't defend the tax benefits."

Whole and universal life's tax benefit could become still more important to affluent families if their income-tax rates rise, as they would under Obama administration plans to restrict the extension of the Bush-era tax cuts.

Meanwhile, middle-class families have been getting a smaller portion of the overall tax benefits, in part because they tend to hold less-costly "term" insurance, which provides coverage just for a designated period and doesn't involve a tax-advantaged investment account.

[Swede]

1. Whole life policies usually only pay the death benefit

and not the saving portion.