US life insurers paid out a record $100 billion in benefits in 2021, according to new data released Monday by the American Council of Life Insurers.
That’s a nearly 11% jump from 2020, which represented the largest year-over-year increase (15.4%) since the 1918 influenza pandemic.
“For the second year in a row, life insurance benefit payments increased by double-digit percentages,” said Andrew Melnyk, ACLI Vice President, Research & Chief Economist.
The ACLI data doesn’t break out the causes of death of life insurance policyholders. But the record increase in payouts may be partly due to Covid-19, which was associated with 460,513 US deaths in 2021, making it the third leading cause of death in the United States last year, according to the Centers for Disease Control.
The purchase of life insurance coverage in 2021 also rose, with nearly 46 million policies sold, a 6.1% increase over 2020, although the total dollar coverage of those newly purchased policies dropped by 1.3% to $3.3 trillion. The average size of a new individual policy purchased last year was $189,830, according to ACLI data.
When a breadwinner in a family dies, life insurance can go a long way toward alleviating any immediate financial stress their spouse and children might experience. And depending on how much insurance a policyholder buys, it can also reduce the family’s future financial worries – such as how to pay for a child’s education or pay off a mortgage.
Many people have some life insurance coverage that their employer provides. Such policies promise to pay your beneficiaries either a flat amount or a multiple of your salary upon your death.
But that free coverage, while useful to have, is usually insufficient to cover your survivors’ needs, especially when you have young kids. That’s because you’ll need that money to cover expenses each year until your dependents don’t need support anymore.
Separately, ACLI data also showed that in 2021 annuity payments, which most typically go to retirees, hit an all-time high, with insurers paying out $97.7 billion to annuity holders.