Term life rates continue to drop

11. February 2008 by Jon Moss.

According to the Insurance Information Institute (III), 2008 will be a buyer’s market as term life insurance premiums fall by 11% from 2006. The downward trend, which started more than 10 years ago, is predicted to continue making term insurance even more affordable.

Based on their calculations, the annual premium for a $500,000 20-year level term life insurance policy in 2008, for a 40-year-old nonsmoker male (standard risk), is expected to be in the neighborhood of $725. The same individual’s annual premium would be about $350 if he qualifies as preferred risk.  For a 40-year-old female nonsmoker, the annual premium rate would be around $600 (standard risk) and $300 (preferred risk).

Although premium rates for permanent insurance products are not exhibiting the same trend as term, III’s projections would be welcomed by consumers as well. The institute is confident that the premium rate for traditional whole life, universal life, and variable universal life insurance for 2008 will stay at 2007 levels.

These changes have been attributed to the consumer-friendly trend to longer life expectancy, profitability and market competition.  In a press statement, III said life insurance rates are falling because death rates have decreased significantly for the primary age group – those between 25 and 44 years old – that buys life insurance. Based on preliminary National Vital Statistics Reports, the death rate for this particular group went down by almost 10% from 1996 to 2004.

Consumers are also benefiting from the generally good interest rate and a favorable investment environment as insurers pass along their savings to customers.

The years 2006 and 2007 were profitable for auto, home and commercial insurance providers. The institute said most of the profits from last year would be reinvested back into the business to strengthen the industry’s claims paying capacity and provide an additional hedge against any future mega-catastrophes. In addition, the intense market competition among insurance players is keeping premium prices at moderate levels.

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