Life insurance shoppers have enjoyed falling term life prices for about a decade, for several reasons:
- People have been living longer.
- Online comparison shopping forced more-competitive rates.
- Insurers lowered their expenses by automating manual processes.
- The cost for insurers to insure themselves was low.
But new rate announcements reveal that the bottom of some term life insurance prices may be behind us.
That means now is the time to initiate an application and lock in a rate. If you've been pondering a quote you received a few months ago, recheck it -- it may have changed.
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Some prices up, some down
When companies adjust prices, it's not always across the board: Some companies are introducing a mix of increases and decreases that vary by customer age, the policy's term or the coverage amount.Sometimes rate increases are small for certain age groups and double-digit for others. For example:
- A 45-year-old male "preferred" buyer will pay 14.6% more for a 10-year, $250,000 policy from one leading insurer, but rates will be unchanged if that same buyer chooses a $1 million policy, and rates will drop 8.1% if he chooses a $1 million policy for 15 years.
- At another leading insurer, some of the biggest increases over previous rates will be for young buyers. For example, a 25-year-old male buyer of a 10-year, $250,000 term life policy who qualifies for a "best" category of rates will pay 33.3% more. But if that same buyer shops for a 20-year, $1 million policy, the rate increase will be only 5.4%.
Rate changes (both up and down) vary widely depending on your age, rate class (best, preferred or standard) and the coverage amount you choose.
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What's behind the change
We can only partly blame the dismal economy for this one. Steven Weisbart, the chief economist for the Insurance Information Institute, says term life rate increases can be due to a number of factors."One possibility is that reinsurance is becoming less cheap," he says. Reinsurance is the coverage that insurance companies buy to protect themselves from losses. "The cost of capital is going up everywhere and for everything. This puts pressure on prices to go back up," Weisbart says.
