Shift to Wealthier Clientele Puts Life Insurers in a Bind

By MARK MAREMONT And LESLIE SCISM
WSJ

The life-insurance industry has enjoyed beneficial tax treatment for its products for nearly a century. Whenever Congress tried to change that, insurers always had a mantra at the ready: We protect widows and orphans.

Life insurance needs to be free from income taxes, the industry said, because of its special social function. It keeps survivors from a life of penury when a chief breadwinner dies.

But in a development all but unnoticed outside the industry, life-insurance companies gradually have shifted away from their broad historical base of middle-class households. Instead, statistics show, an increasing portion of insurers' business consists of selling large policies to wealthier Americans, often as part of complex estate-tax plans.

The shift means that a growing proportion of the tax benefits of life insurance goes to the well-off, not to the middle class that once was the industry's backbone.

(Article here.)