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Term life insurance quotes set to rise

History is a very strange creature. Just when you think you have figured out what the past is trying to tell you, some new information comes your way and makes it all uncertain again. In theory, term life insurance has always been the cheap way to buy protection for your family. The assumption is that your dependents only need that protection over the early part of the relationship. Once you are established, you can pay down your debts and start saving for the future. Except, of course, not everyone plans and executes the most rational financial strategies. As the housing bubble began to grow twenty years ago, many people forgot the lessons of history. There have always been cycles of boom and bust. The idea that a boom can go on for ever is a nonsense. But with property prices rising fast over such a long period of time, people decided to use the trend to build what they hoped would be long-term security. Such are the dreams of those who ignore history.

However, while resale prices were rising and falling, something strange was happening to the annual premium rates for term life insurance. One of the key advantages has always been that the policyholder can lock in a low premium rate for the term. As inflation slowly erodes the value of money, the payments become steadily more affordable, but the death benefit stays a useful amount to receive. If you look at the insurance market twenty years ago, a twenty year term for a middle-aged man was about $1,000 per year for a $500,000 policy. Today, you can pick up the same policy for less than $500. This is a remarkable event in the world of financial products. It’s quite common when the patent runs out on a product and competition forces the price to drop. But the drop in the cost of term insurance is fairly unprecedented. It reflects increasing consumer resistance to paying high premiums for a product people hope never to use.

The problem is that the life insurers operate within limits of reasonableness they define. Although the Insurance Commissioners who oversee the insurers in each state lay down detailed regulations, a lot is left to the insurers. There’s increasing evidence the insurers have been manipulating the fees and charges they impose on policyholders. Many of the Insurance Commissioners are proposing changes in regulations which aim to limit abuse of charges. Further, governments are becoming more interested in life insurance as a tax shelter. Money paid into a life policy may never be taxed in the hands of the consumer or, if the insurers maintain high charges, in their hands as profit. If these new regulations appear, all life insurance quotes are likely to rise but the term quotes are likely to rise faster. So to avoid being caught out, watch your local state for proposed changes and keep getting life insurance quotes. If you see rises, buy!

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