The price of term life insurance has fallen to historic lows, according to a survey of 25 insurance companies conducted by Insure.com. One reason for the decline in insurance rates is the decline in mortality rates: from 2003 to 2004, the age-adjusted death rate dropped 3.8 percent, from 832.7 deaths per 100,000 people to 800.8 deaths per 100,000 people, the lowest level in U.S. history.
Fewer deaths mean fewer death benefits paid by insurance companies, reducing insurer costs and giving the insurer more time to earn money with the premiums it has received. Some additional earnings are applied to the bottom line, but others are used to lower rates for consumers, allowing the companies to better compete for new business. With hundreds of companies offering insurance on the Internet, competition is fierce. This has helped drive prices for term life insurance to new lows.
For its study, Insure.com surveyed the twenty-five U.S. life insurance companies with the highest ratings by A.M. Best Company, the leading provider of ratings and financial data for the insurance industry. The companies surveyed had all earned A++ or A+ (Superior) or A or A- (Excellent) ratings. Companies that have lower financial ratings most likely would offer lower premium rates, but the rating company would consider them to less secure financially.
The survey focused on 10-year, 20-year, and 30-year level term policies with death benefits of $250,000; $500,000; and $1 million. The lowest rates are available only to those people in good health, with good height-to-weight ratios, who do not smoke. Insurance rates go up with age, so the survey includes prices for people 30 to 70, broken out in five-year increments. The rates provided were for an example individuals residing in California on November 12, 2007.
The lowest rate for a $250,000 10-year level term policy was $108 a year. The rate was available to 30-year-old men and women. The lowest annual rate for a 20-year policy was $153. The lowest annual rate for a 30-year policy was $228. The rates were the same for men and women for those terms as well. At 35, the rates were unchanged for 10- and 20-year term policies, but went up to $250 a year for a 30-year policy. Again rates for were the same for men and women.
Rates for men and women diverge at age 40, but not in the direction some people might expect. Women actually pay $20 a year more for a 30-year, $250,000 policy—$355 a year, compared to $335 a year for men. The higher rate reflects the risks posed to women by breast and cervical cancer. Men and women pay the same for 10-year and 20-year policies: $130 a year and $203 a year, respectively.
The increased risk of heart attacks among middle-aged men is reflected in the rates for 45-year-olds. Women and men both pay $183 a year for 10-year policies with a $250,000 death benefit, but men pay more for 20- and 30-year policies. The lowest rates for 45-year-old men were $340 for a 20-year policy and $520 for a 30-year policy. Women pay $318 and $428, respectively.
At age 55, men are paying substantially more than women, due to their shorter life expectancy. Men pay $403 a year for a 10-year policy, $773 a year for a 20-year policy, and $1,550 a year for a 30-year policy. Women pay $345, $580, and $1,130 for the same policies, respectively. Rates continue to diverge with age. At 70, for example, the lowest rate for a 10-year policy for men was $2,160 a year. For women, it is $1,080 year.
The gender gap increases as death benefits increase. At 30, men and women pay the same annual premium for a 30-year policy worth $250,000. However, 30-year-old men pay $70 a year more than women for a 30-year policy worth $500,000—$395 a year, compared to $325 a year for women. When the value of the policy goes to $1 million, men pay more than women for both 20- and 30-year policies: $420 a year for a 20-year policy and $710 a year for a 30-year policy. Women pay $370 and $565, respectively.
Several factors can prevent a person from getting the lowest possible rates. The biggest disqualifier is weight. To receive the lowest rates, a 6-foot man must weigh no more than 198, 203, or 206 pounds, depending on the company that insures him. A person man weighing just 215 pounds would have to pay 30 percent more than the lowest rate.
Cholesterol levels, blood pressure, and family history of heart disease or cancer can adversely affect insurance rates. So can dangerous habits and hobbies, such as tobacco use, poor driving record, and even participation in sports such as motorcycle racing or mountain climbing.
Even if a person does not qualify for the lowest possible rates, however, there are still good deals to be found, thanks to the overall increase in life expectancy.
Life Insurance - The Low Price of Term Life Insurance
