Price of Term Life Insurance Drops

Price of Term Life Insurance Drops

2 May, 2007

Term life insurance provides peace of mind for many of us. It helps us take care of our loved ones long after our death. The good news is that the price of term life insurance is continuing to drop, and that could mean a substantial savings for you.

According to the Insurance Information Institute, a 40-year-old nonsmoker could get a $500,000 term life insurance policy in 1994 for $1,300. The same policy today would roughly be $641 – that’s a savings of about 50 percent.

“Term life insurance costs have dropped because people are living longer,” said Douglas G. Bambeck, an investment advisor representative with Investment Partners LTD in New Philadelphia. “Increased competition in the marketplace and the advent of the Internet has also driven down costs.”

This drop in premium rates could mean substantial savings for those who started a policy many years ago. It also makes insurance more affordable for many families who have a great need for survivor income but limited cash resources.

“Everyone should have their policies reviewed since life and circumstances change,”
Bambeck said. “In addition to the lower cost of insurance, other factors for a review include a change in needs and improved health, especially if you have recently quit smoking.”

You should talk with your insurance agent or financial advisor to see if changing your life policy makes sense in your specific situation.

Those with policies which automatically renew each year may benefit from moving to a level-premium policy where the premium remains the same for the policy term. Making this switch may not only save you money, but it may allow you to extend the time period that the rate is guaranteed.

If price is your main motivator, be sure that you are comparing apples to apples by reading the fine print in both policies. Some 30-year term policies have a lower price for the first 10 years and then go up. In addition, there are new term policies that actually charge more for the coverage, but offer you a partial refund of premiums if you live past the policy term.

“You have to be cautious buying on price alone,” Bambeck said. The financial strength of the company you purchase insurance from is also important. No insurance company has ever failed to pay a life claim, but that doesn’t mean it won’t happen, Bambeck added.

If you have not reviewed your life insurance recently, now is the time to do so.