subject: Term Life Insurance Rates May Rise [print this page] Term life insurance online is an easy, inexpensive way to insure yourself for your family"s sake. Permanent life insurance solutions, the less popular cousin of term life, are viewed with apprehension and suspicion these days by many, with a majority of middle class families opting for term life insurance because it is so much cheaper. Also, many financial gurus strongly advocate it. One would almost believe that every family in the United States must have some form of life insurance, at least on the breadwinner.
What many people may already know is that life insurance policy ownership in the US is at a 50-year low. Only 44% of US households have any form of life insurance, and the future looks bleak if many more are going to join the struggle to pay for essential expenses in the coming years.
Life insurance is not a primary insurance instrument in most families, unlike car insurance or home owners" insurance. Many would much rather pay off debt, save for retirement, or struggle to keep food on the table and pay the bills. A LIMRA report that surveyed and studied these findings said, "4 out of 10 families with children would have immediate trouble paying the bills if the primary breadwinner died today"1. This bleak picture is compounded by the fact that having life insurance is not mandated by law, and very little is understood about how much is necessary, what type is needed and where to buy it from.
This is coupled with a trend in low term life insurance ratesin many years. "Insurers have been lowering rates for at least 15 years on term life insurance. In 1994, the lowest rate in the country for a 40-year-old male who wanted a $500,000, 20-year-level term policy was about $995 a year. Today, that same 40-year-old, in perfect health, could buy the same policy for well under $400 a year. So that's pretty dramatic," says Byron Udell, founder and CEO of Accuquote.com .
However, with reports of employment growth and a still-volatile economy, there are reasons to believe that term life insurance rates may rise. The Wall Street Journal (WSJ)2 remarks that this rise is due to these reasons.
The factors that contribute to a rise in insurance premiums are-
1. The low rates of returns that carriers get for when they invest your premium in the market (which results in death benefit reduction, creating a premium raise, effectively passing the buck on to you).
2. Higher capital and reinsurance costs for carriers because of a tighter credit market make it more expensive for insurers to maintain needed cash reserves. There are also more stringent SEC lines that carriers have to stay within to keep selling life insurance
What this entails, according to the WSJ article, is a change in consumer habits, to buy a different term life insurance policy every few years. It may force people to stick with what they have because the rise in rates is affecting all carriers in varying ways.
Don"t let this rise in premium put you off buying life insurance, especially if this is your first policy of any kind. There is no saying where the markets are going to be in a few months, and you don"t want to regret not having bought when prices were still affordable. Premiums for certain age and risk groups and policy amounts also are increasing, so if you have reason to believe that your ratings would have been higher than usual, also buy now.
Make sure to look around before buying, because the rate increases will vary widely from company to company. Also, buy guaranteed level term premium, so the rates won"t rise on you indefinitely in the future. Other factors that affect underwriting class and ratings, such as health and lifestyle profiles, age, and pre-existing medical conditions, exert more significant control than the rise described here, so make sure to consider these other factors first while buying life insurance.
For those in between the application process for a policy with reasonably low rates, do not worry about these rising rates. An insurance carrier cannot change it once the application has been accepted. Try looking up affordable term life insurance quotesonline; you"ll be surprised at how cheap coverage still costs for healthy individuals still. Lock in these cheap rates on low cost life insurance and get them reviewed when it"s safe to shop around for a new, cheaper policy yet, again.
by: Pat Cassidy
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