Why do life insurance rates keep dropping?

Why do life insurance rates keep dropping?

Updated May 1, 2019: Pacific Life recently lowered its life insurance rates, continuing an 20-month trend of price drops in the industry. Back in March, AIG and Banner Life lowered their life insurance rates, with AIG touting its decreases as “some of the lowest premiums in years”. Lincoln Financial, Protective Life Corporation and Mutual of Omaha also lowered rates over the last year.

Why life insurance rates keep dropping

People are living longer, due to health care advancements. That’s curbed payouts associated with term life insurance, a policy that provides coverage for a set period of time, but ultimately, expires.

On top of that, online applications have saved companies time and money on administrative work, says Patrick Hanzel, certified financial planner and senior associate of advanced planning at Policygenius.

The changes have insurers are competing for market share. (Policygenius can help you easily compare and buy life insurance across carriers.)

Should you apply now?

Yes — but not simply to capitalize on the trend.

While life insurers set their base prices, your specific rates are set by a bunch of factors that provide insight into how risky you are to insure. The big ones include your age and your health. The older you get, the more expensive your premiums. Any conditions you develop later in life will lead to higher rates, too.

In other words, unless you’re currently in very poor health, a policy will never be cheaper for you than it is right now. In fact, premiums increase by an average of 8% to 10% every year you put off buying it.

How to get the best life insurance rates

Of course, buying life insurance while you're still young and healthy is one way to save on rates. Here are some more.

  1. Opt for a term life policy, since they are much cheaper than whole life insurance policies and meet most shoppers' needs. For a full explainer on term vs. whole, check out our Learn Center page.

  2. Comparison-shop. Insurers change prices over time (see above). Plus, they all have different underwriting standards, so one life insurance company may be more amendable to your specific profile than others — and offer you a better deal. We can help you easily compare life insurance quotes across companies here.

  3. Pay premiums annually. Insurers offer a discount to people who pay for their policy in bulk. For instance, some companies offer as much as 8% off if you pay them once a year instead of monthly.

  4. Look for a guaranteed level term premium policy. That's a fancy way of saying your premiums won't increase during the life of your policy.

One final note: It's important to shop for the right amount of coverage. Our life insurance calculator can help you figure out how much financial protection you need.

Disclosure: Policygenius offers insurance policies from many of the nation's top insurers, who pay us a commission for our services. However, all editorial choices are made independently.

Image: Akshar Dave