Term Life Insurance Rates Rise
After more than a decade of decline, term life insurance rates have changed course, increasing in 2012.
Previously, we wrote about term life insurance and how it differs from various forms of permanent life
insurance, such as universal life or a variable life annuity. In our continuing series on life insurance, we
are exploring the trends and trade off’s between historically, ever –decreasing term life rates and recent
changes causing this reversal.
To begin, rates have been decreasing since the mid-1990’s largely due to one reason – the internet.
Authors Steven Levitt and Stephen J. Dubner devoted a chapter in the book Freakonomics to the topic of
information availability and its correlation to price. The internet made it easy, for the first time, to
compare term life insurance rates from hundreds of different policies in the comfort of one’s home. This
increased competition caused term life rates to drop by 70% from the mid-1990’s.
In addition to increased competition and information availability online, two other factors drove down
prices, according to Bankrate.com. First, life expectancy has increased, thanks to improvements in
medical treatment. Secondly, the stock market saw tremendous increases from 1990 through 2000,
allowing insurance companies to reinvest premium dollars has higher rates of return. These greater
returns have been eroded with the stock market crash and subsequent recessionary period over the
past four years.
The above factors have seemed to run their course and 2012 shows to be a tipping point for term life
insurance rates, with several companies initiating 5% to 10% increases this year. While term life rates
will likely start trending along with financial market performance, prevailing interest rates, and inflation,
there are some key underlying trends that are much more drastic than overall average rate trends.
The primary drivers of term life insurance rates are an individual’s age and physical condition. Compare,
for example, a 37 year old, non-nicotine user in Virginia to a person just 3 years older at 40. For the
same 10 year policy, our top 10 least cost policies at PeopleSurance range from $175 to $200 per year.
For the 40 year old, our top 10 least cost policies range from $195 to $240. Using a percentage change
for each of these two, otherwise identical individuals, the increase over three years is between 11% and
20%. If each of these individuals is seeking a 20 year policy, the differences increase to 27%.
While term life rates are projected to increase along with the rate of inflation between 4% and 6% over
the long term, a person’s age will have a much more pronounced effect, causing increases of between
3% and 9% with each passing year. In addition to age – based premium adjustments, significant
unforeseen changes in a person’s health could cause even greater increases. If you are currently in a
preferred plus health status (which we will be discussing next week) and you discover you have high
blood pressure in the next year, you could be paying a drastically increased premium rate by delaying.
For a free, no obligation quote from our universe of term Life insurance rates, click on PeopleSurance
and begin your study on rates in your area. You can quickly compare the difference between hundreds
of policies and dozens of providers. Our life insurance calculator can help you determine exactly how
much term life insurance you should be shopping for based on your current financial situation. If you still
have questions, call, email us, or live chat with one of our agents today. We can help make your
complicated decisions easy.
To know more about Life insurance agent and to gain some insightful knowledge on Term life insurance
quote then do visit our website : peoplesurance.com
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