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Other Articles
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Life Insurance
Industry Wide Term Life Insurance Pricing Changes Mean Lower Premiums for Consumers
By Amy Rose Herrick
Amy Rose Herrick, ChFC, IAR Economic Consultant, Amy Rose Herrick, ChFC, Economic Consultant
In August of 2004, a Wall Street Journal article announced term life insurance rates were at rock bottom and would soon begin to climb. The exact opposite has occurred to the benefit of the consumer in this extremely competitive industry.
Although the level of sales in this segment of the life insurance premium game has remained relatively stagnant at about 23% of all premiums remitted, more coverage is really in force than before the price reductions as a result of the pricing decreases.
Term life insurance rates today industry wide are about 50% less than they were ten years ago. Can you think of anything else that has dropped in cost that much lately and nobody noticed or got excited about it? I can’t either.
Healthy age 35 males today seeking $1,000,000 of 20 year level term premiums could secure coverage from five of the top insurers in this market with annual premium differences of $30 or less per year between policies and carriers. That is extremely close competition and pricing. Females will experience similar competitive pricing results.
Only two of the top insurers were found to have retained the optional riders to allow premium conversion credits if the insured desired to convert the term coverage into permanent coverage within rider limits as a part of the competitive re-pricing strategies. If this option is important to your insurance premium plans in the future, act fast because this already very limited availability could vanish with the next round of industry wide re-pricing and little time to act before changes would go into effect.
Another area that can benefit the consumer is how the premium is calculated. An experienced agent will know that different companies price the product on either your last age, or your nearest age. This difference of one birthday could save thousands of additional dollars in premiums over the life of the policy. Just one year of advancing age could reduce the length of the level premium guarantees so your agents experience, and your timing is worth a lot of money and future guarantees in this situation.
Group term rates have not followed suit. In fact, they can often be much more expensive for the convenience of payroll deduction than their privately secured counterparts for healthy individuals.
On a government benefit website a 45 year old male seeking the maximum $250,000 of group term coverage offered would pay $570 a year, and the premiums will increase in five year increments. If the same fellow applied for a private policy, for the same $250,000 of coverage with premiums guaranteed to remain level for the next 20 years, he would qualify for a rate of only $404 annually. The premium savings over the 20 year life of the private policy versus the group coverage is substantial. In addition, he would not be limited to the $250,000 group coverage offer maximum, and would likely qualify for higher amounts if desired, but only if he applied outside of the plan to a private insurer.
On another website for and Engineering Society, a 45 year old male seeking a $1,000,000 of coverage would pay $1,880 annually for the current association sponsored group term coverage. If he applied for a private policy, the premiums dropped over 1/3 to a mere $1,270 annually with the 20 year level premium guarantees. Why would anyone want to pay an extra $600 a year in premiums for no benefit? One can only assume it would be because they did not ask an experienced agent to do any comparison shopping first on their behalf before they signed up.
The life insurance industry as a whole has also responded to the recent increase in refinancing of home loans, and new home purchases with reductions in term insurance premiums for the 15 and 30 year products often tied to the pay off period expected on a mortgage debt.
If you have not taken the time to complete a review on all your life insurance coverage recently, there is no better time to contact an independent agent to find what your coverage bargains could be and lock in low premiums now for years to come. Many will determine they can secure term life insurance coverage at an older insurance age now for less than what they are already paying for their old policies.
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