Annuity Sales Jumped During the Pandemic. Here’s Why

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It’s been a year, hasn’t it? And, while in many ways we’re still living under the shadow of Covid-19, there’s reason to be hopeful that the end is in sight.

Now as we look back, some interesting trends are coming into focus. For one thing, sales of life insurance policies and annuity products jumped sharply in the last year as more and more people started to consider their long-term options and took action.

By the numbers: According to Limra, a research firm focused on the insurance industry, sales of both life insurance policies and annuities were up about 11% in the first quarter of 2021 compared with the same period in 2020. 

The reason? Not to be grim, but as more people died from Covid those of us who remained got a good look at our own mortality, and it wasn’t a pretty picture. The pandemic definitely got some people thinking about their coverage.

After all, barely over half of all Americans have a life insurance policy in place right now, even after the spike in the last year, leaving them at risk of financial losses if another pandemic type event, or just plain old aging, upends their plans. 

A look at the flipside:

A lot of this jump in sales can be attributed to the fact that annuity sales across the U.S. slumped badly early in 2020, totaling just $219 billion. That’s down 9% from the year prior, according to the Secure Retirement Institute’s (SRI) U.S. Individual Annuity Sales Survey.

That also helps explain the fact that annuity sales bounced back to pre-pandemic levels in Q4 of last year, up 2% from 2019 to total $58.6 billion.

Quote: “At the start of the pandemic, the 10-year treasury plummeted to 56 basis points and the equities market contracted 32%. Worried investors turned to registered index-linked annuities (RILAs) and fixed-rate deferred annuities for the balance of downside protection and investment growth. As a result, protection-focused products increased market share, representing more than half of all retail annuity sales in 2020.” — Todd Giesing, senior annuity research director, SRI

What does this all mean?

Not much, actually.

Sales of all kinds of things fell off sharply last year — cars, houses, clothing, etc — and all segments are currently enjoying a boom as pent up demand drives spending back to more normal levels.

But, as with everything else, demand drives prices. And in annuities that can mean the difference between the monthly check you’re expecting and one that maybe comes in a little smaller or larger. That’s why it’s so important in times like these to shop around and find the right annuity for your particular situation. 

You never know how big those differences might be.

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