How To Determine the Right Life Insurance Rate for You
When pondering coverage, buyers first should inventory their assets: job insurance perks, Social Security benefits, IRA accumulations, stocks, bonds and savings accounts. Then consider factors, such as how many people work in your household and if your need is temporary or permanent. For instance, do you want your spouse to stop working to care for the children?
Next, is the price you pay reasonable? Insurance companies use life expectancy tables and risk classes to determine rates, then factor in underwriting costs. They consider mortality rates over time, so isolated events, such as the Sept. 11 attacks, don't significantly impact rates. Today, Internet speed means companies compete on rates by the minute, so overall life insurance rates have plummeted nearly 60 percent from their costs just seven years ago, says Byron Udell, founder and CEO of AccuQuote. Yet a 40-year-old in good health seeking a 20-year term policy can find quotes ranging from $27 to $189.
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When is a Good Time to Lock in Your Insurance Rate?
If you buy a term policy, there's no penalty to committing today. Just as homeowners refinance mortgages at lower interest rates, life insurance policyholders can cancel a policy at any time to replace it with a less expensive equivalent -- providing their health remains stable, of course.
Once you've figures out the right direction for you, don't always immediately for the cheapest option. A few extra bucks for an A-plus-rated firm makes sense, agents say. Niceties like convertibility and quick claims processing stack up, too. In other words, price isn't the only consideration.
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Life Insurance Rates and Living Longer
Back in the "good old days" it was a rare feat when someone lived to the age of 70 or 80. These days, with our modern advances in medicine, treatment, and healthier lifestyles, more and more people are living longer and enjoying good health well into their golden years. Studies show that over 49,000 people nationwide are over 100 years old, up dramatically from just a decade ago. According to U.S. census data, the number of people that live to 100 or beyond is expected to double each decade, and the fastest growing population in the U.S. these days is people that are 85 and older. And many aging experts say they are surprised every day by the number of people that are able to live without assistance well into their 90s.
What does this have to do with your life insurance rates? Insurance companies are adopting new actuarial tables that incorporate new mortality levels, these actuarial and mortality tables are utilized by life insurance companies to compute the probability of death by a certain age. In other words, they tell life insurance companies how long you are expected to live on average based on your age and sex. While life insurance companies have until 2009 to implement the new actuarial tables, many will do it sooner rather than later. That means it is especially important to examine your policy frequently, and compare rates of various companies to see who has adopted the new tables and are therefore able to offer lower rates.