Benefit from Decreasing Term Life Insurance Rates

Consumers now enjoy great news when it comes to lowered term life insurance rates!  According to the Insurance Information Institute, insurance policy rates are expected to continue its decline this year.  In fact, since 2000, consumers have enjoyed affordable term rates, which have dropped an average of 4% each year.  Between 1990 and 2007, term life insurance have decreased by nearly 50%.

Why rates decreased industry-wide?

There have been two industry-wide factors impacting the affordability of term life insurance:

Longer life expectancy – The longer life expectancy of Americans has significantly increased in recent years and thus mortality rates in general have decreased.  For example, between 2003 and 2004, the average mortality rate for all age brackets and genders decreased by 1.3% – 4.5%, which thus lowers the risk for life insurance companies.

More effective administration – Interestingly, some of the changes to term insurance rates come from the companies themselves.  With increased efficiency in administrative operations, insurance companies have been able to lower their costs, thus passing along some of the savings to consumers.

What term life insurance rates should you expect?

Of course, an affordable term life rate depends upon a variety of factors, including age, health, occupation, and medical history.  Here is a general guide for what to expect in the upcoming years.

An insurance company will attempt to classify whether you are a “standard” or “preferred” risk.  Typically, most healthy, non-smokers fall within “standard” risk, but if you can meet the stringent health requirements set forth by insurance companies, then you could qualify for “preferred” risk.

A 40 year old non-smoker man, who wishes to purchase a 20 year term policy with a benefit of $500,000, will see term life insurance rates of $725 annually if he is in “standard” risk.  For the best term life rates, he would want to qualify as “preferred” risk, which would drop the rate to only $350 annually.  If you fit the same criteria above, but are a woman, then your rates are even lower.  For a term life insurance rate comparison between men and women, a female will enjoy a rate of $600 for “standard” risk, or only $300 for “preferred” risk.

The greatest factor for term life insurance coverage rates: Smoking

When you are performing a term life insurance rate comparison for the current year, you will still find that the greatest price discrepancy comes between smokers and non-smokers.  In the eyes of insurance companies, smokers have a tremendous health risk, and this is clearly reflected in the rates.

For example, in the 40-year old male example discussed above, his “standard” risk rates would exponentially jump from $725 to $1,775 annually if he was a smoker.  For women, the term life insurance rate comparison between non-smokers and smokers would be $300 and $1,000, respectively.

Indeed, term life rates are expected to continue to fall in the upcoming year.  To truly enjoy the best term life insurance, however, smokers are encouraged to quit smoking one year before they wish to obtain an insurance policy.  By staying healthy and not smoking, you can then enjoy the best term life rates available in the industry.