Refinance your life insurance

By Liz Pulliam Weston

If you've got a term life insurance policy, chances are good that you're paying too much for it.

Rates on term policies that had been tumbling for more than a decade are now, according to Insure.com, starting to rise again. (Term policies are "pure" insurance options that offer a death benefit but no investment component, as opposed to "cash value" or "permanent" insurance that combines a death benefit with an investment feature.)

Millions of Americans used lower interest rates to refinance their mortgages, sometimes repeatedly, and many even refinanced their cars. But many people are failing to take advantage of a similar opportunity to get cheaper life insurance while the rates are low.

Better premiums are out there

You might be missing out on a good deal if you:

• Bought your policy years ago. People assume that because they're older, insurance will cost more. In reality, competition and lower mortality rates have driven premiums down to the point where you can pay less for a policy at age 50 than you did 10 years ago when you were 40.

• Buy your coverage through your employer. This may be a convenient way to buy insurance, but it's an expensive way to go if you're younger and healthier than the average employee. The insurer prices the policies to cover the higher-risk folks, so you're essentially subsidizing the older, sicker workers.

• Don't qualify for "preferred" rates at your insurer . . . and don't realize that you may very well qualify for lower premiums at another company.

Sorting out the risk factors

Many insurance companies are getting pickier about who gets their best rates, said Steve Irwin, analyst for insurance rater A.M. Best. You can get knocked out of the running if you carry a few extra pounds, smoke an occasional cigar or even travel to certain destinations. But insurers vary widely in where they draw the line, so it's worth shopping around.

At many companies, for example, you can lose out on the best rates if a biological parent or sibling died of cancer or heart disease. But the details of their illness can make a difference.

Prudential won't give its best rates on certain policies to those whose relatives died of either condition before age 70, according to Insure.com. At Transamerica, you're shut out of the lowest premiums only if a parent died of cancer or cardiovascular disease before age 60. American General asks only about cardiovascular disease, and keeps its lowest rates for those whose parents were diagnosed after age 60.

Here's how the three companies treat some other health and safety issues:

• Elevated blood pressure or cholesterol. Any history or current treatment for either condition will prevent you from getting Prudential's best rates, while American General is OK with elevated cholesterol treatment as long as your current levels are relatively low; it's high blood pressure that will get you kicked out of the best-rate queue. By contrast, Transamerica is fine with a history of high blood pressure as long as it's being treated by medication or is no longer a problem, but a history of or treatment for high cholesterol can prevent you from getting the lowest premiums.

• Weight. Here's where a few pounds makes a big difference. American General wants a 5-foot-5 woman to weigh 165 or less, while Prudential opts for 174 (and 186 if you're 65 or older) and Transamerica offers a generous 179.

• Smoking. Most insurers take a zero-tolerance view, which means that if you admit to a single puff in the past five years (two years for Transamerica), you wind up with higher rates. American General sees that a cigar is sometimes just a cigar, not an addiction, and will give its best rates to those who admit to having a stogie as often as once a week.

• Hobbies. Prudential and American General won't give their best rates to scuba divers or private pilots. Transamerica allows diving up to 75 feet and will give pilots its best rate as long as they agree to exclusions for their flying. (In other words, the pilot's heirs wouldn't get paid if the pilot dies in a noncommercial plane crash.)

Travel to "dangerous" countries -- those on the U.S. State Department's Travel Warnings list -- will keep you from getting most companies' lowest rates. So will any number of illnesses and conditions, from asthma to ulcers.

Are the insurers' limits always fair? Of course not. No one would argue that you're 25% greater a risk if you weigh one pound over the companies' limit, versus one pound under, said insurance expert Bob Barney, and yet your rates may go up that much if you miss the cutoff. And a parent who died of cancer might have been exposed to industrial toxins, not have had a genetic predisposition to the disease -- but your rates won't reflect that.

Continued: Tell the truth

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