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Term Life Insurance: Now May Be the Best Time to Get Affordable Insurance Coverage

By Compuquotes Team on January 22nd, 2010

There may never be a better time to buy term life insurance than right now.

After several years of declining rates, premiums for term life insurance started inching up last year, and many experts expect that trend to continue.

Rate increases in 2009 were announced by the majority of firms that sell term life insurance policies. One industry expert estimated that 75% of the country's insurers have raised rates between 5%-15%. Although life insurance costs remain historically low, many industry experts expect rates to continue to climb--making now the best time for most consumers to get an online insurance quote.

What's Happening with Life Insurance Rates?

The factors that are prompting the rate increases include:

  • The Credit Crunch. Insurance companies use cash reserves and lines of credit to help cover the amount of the policies they sell, but sources for much of that credit have dried up or gotten more expensive since the financial crisis began
  • The Cost of Reinsurance Has Increased. According to the Insurance Information Institute, reinsurance is a policy that insurance companies buy to protect themselves from huge losses related to catastrophic events. Those reinsurance premiums, the institute says, are going up and reinsurance companies are requiring that their clients spend more money to screen potential clients
  • Return on Investments Has Declined for Insurers. Insurance companies take the money you pay them for your policy and invest it. Most have always counted on a 4%-5% return on that investment, but in recent months the return has been much lower than that

Important Life Insurance Information

According to the American Council of Life Insurers, if someone depends on you financially, you probably need life insurance.

Ask yourself: If you were to die, how would your spouse or your children manage without your income? Could they make the house payment? Could they afford college?

Life insurance may provide financial security should you pass away.

While the amount of life insurance you need varies, many experts suggest that your life insurance policy should pay a benefit equal to seven to 10 times your annual income.

What Is Term Life Insurance?

Term life insurance is one of the most popular types of life insurance coverage, and covers you for a fixed period of time. Depending on your needs, policy terms can be as short as 1 to 5 years, but can go up to 30 years. The policy pays benefits only if you die during the time period in which you are covered.

Term life insurance makes sense for consumers who have financial obligations--such as tuition or mortgage payments--that disappear over time.

Why Did Rates for Term Life Start Decreasing?

Prior to 2009, the booming stock market and growing Internet competition led to a nearly 70% drop in term life insurance rates from the early 1990s.

Free insurance quotes online allowed customers to find the cheapest insurance for term life insurance quickly and conveniently, and insurers responded by offering low cost insurance. Insurers could offer more affordable term life insurance because their investments were doing well.

For example, according to a Buffalo News Article from July 2009, an insurance premium of $1,400 annually in the early 1990s might have cost $350 in early 2009.

The more affordable insurance and instant insurance quotes led many consumers to cancel their old policies and take out cheaper new ones. Many increased the amount of their coverage and kept their original payment.

Another factor: People were simply living longer, and insurers were having to pay out fewer benefits as a result. If you live through the length of your policy, the policy expires and the insurance company keeps the premiums.

Best Way to Get Life Insurance Quotes

The Internet remains your friend when it comes to finding cheap term life insurance. It continues to provide a way to compare life insurance. Some insurers have had to back down from rate increases because online shoppers received better term life insurance rates from competitors.

Compare life insurance quotes from multiple insurance companies and use a life insurance calculator to choose the most affordable life insurance for you and your family. Obtaining competing quotes from qualified agents can be simple as entering your zip code.

Not All Insurance Rates Have Increased

Insurance rates are not increasing across the board. In some cases, rates have only increased for certain term periods, certain age groups, or for certain coverage amounts.

Prices may remain higher for older consumers, and for customers who smoke or have dangerous occupations. You may also pay more if your weight-to-height ratio puts you in the obese category.

But if you are thinking at all about buying term life insurance, or if you are thinking about re-examining your existing policy, don't wait too long. Rates are not expected to go down again any time soon but they are expected to rise.

Source :
Gregory Karp • Snap up low prices on term life insurance before rates rise • Jan 11, 2010 • Buffalo News • http://www.buffalonews.com/485/story/731111.html
M.P. MCQUEEN • Insurers Raise the Premiums on Term Life • Jun 09, 2009 • Wall Street Journal • http://online.wsj.com/article/SB124450333064895949.html
Brian O'Connell • Term Insurance Rates Are Going Up • Jun 15, 2009 • mainstreet.com • http://www.mainstreet.com/article/moneyinvesting/insurance/term-insurance-rates-are-going
Life and Health Insurance Foundation for Education • http://www.lifehappens.org/young-families/
Life and Health Insurance Foundation for Education • Term Insurance • http://www.lifehappens.org/life-insurance/term-insurance

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