Wal-Mart's New Sale Item Worth $25,000: Life Insurance

Wal-Mart's chief consumer base is American consumers with annual incomes of $50,000 or less -- a demographic less likely to have life insurance than consumers with higher incomes.

To fix that, and to give consumers another reason to shop at Wal-Mart (NYSE:WMT), the big box giant is offering life insurance to its customers, on a limited basis, in a pilot program.

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The program is running in about 200 retail stores in Georgia and South Carolina, and the insurance policy end of the deal is being handled by MetLife (NYSE:MET). The insurance firm is offering Wal-Mart shoppers a pre-paid, one-year $10,000 to $25,000 life insurance policy that costs, on average, about $100 or so.

The cost depends on a consumer's age and need for insurance. For Wal-Mart shoppers aged 18-44, a $10,000 policy costs $69. But for consumers aged 60-65, the policy can cost up to $429.

Wal-Mart shoppers simply buy a prepaid card at the store, pay for the policy and activate the insurance policy by calling a 1-800 number provided by MetLife. If the consumer is rejected for any reason, Wal-Mart has a unique hook: The customer can use the prepaid card to shop for goods at any Wal-Mart.

In an appearance on Bloomberg.com, Janney Montgomery Scott analyst David Strasser says Wal-Mart is looking to bring life insurance to the neglected masses and may be just the outlet to get that job done.

"[Wal-Mart wants to] democratize life insurance, where you can get life insurance for $100 or so," Strasser says. "It's an attempt to educate people on life insurance and get them to move on to buy more substantial insurance products over time."

This week, Wal-Mart has also taken a significant step into the prepaid consumer credit card business, with a deal with American Express (NYSE:AXP).

With its Bluebird card, Wal-Mart is once again looking to leverage its huge customer base to bypass banks and gain a foothold in the consumer banking market, using Amex as a gateway.

"The financial services landscape is changing," says Dan Schulman, a group president at American Express. "Technological advances, regulatory changes, and evolving consumer needs are redefining payments, ranging from prepaid to checking and debit. Bluebird is our solution to help consumers who currently may be poorly served by traditional banking products. It allows them to easily and safely move, manage, and spend their money. In an era where it is increasingly 'expensive to be poor,' we have worked with Wal-Mart to create a financial services product that rights many of the wrongs that plague the market today."

If financial services firms aren't looking over their shoulders yet at Wal-Mart yet, they should be.

At least MetLife and Amex have it right: If you can't beat 'em, join 'em.