While many people would say that term life insurance today is still fairly similar to what it was 50 years ago, experts in the field are quick to disagree.
Yes, the basic concept of term life insurance—a life insurance policy that covers a specific time period—is still the same. But many things are different.
Today’s term life insurance isn’t the same as what your parents purchased. Here’s why:
Costs have dropped.
One of the biggest changes in term life insurance is the cost. While it’s true that a lot of different types of insurance, including health, automobile, and homeowners, have increased over the years, term life insurance premiums have actually decreased.
Term life insurance premiums hit an all-time high in the 1990s, but ever since, they have been decreasing. In fact, they’ve dropped about 70 percent since then! That is a major decrease, and it appears rates may continue to drop or, at worse, hold steady.
Living longer equals fewer payouts.
What led to this cheap term life insurance? First, people are now living longer than ever before. This means that more and more people were outliving their term life insurance policies, so the insurance companies weren’t paying out. This means that the companies were making more money, so they were able to lower rates.
Term policies also usually pay out less often than permanent policies do, so even though the premiums are much lower, the cost to the insurance companies are also lower.
Investments and technology keep premiums low.
Another reason insurance premiums have dropped is that investment returns have increased. While that may not, on the surface, seem to have much to do with premiums, it actually does.
Insurance companies most often take insurance premiums and invest them in high rated bonds. Technology, better cost control by companies, better management and better general investments in these bonds all help the insurance companies make money off premiums.
As long as they’re making money from other sources, insurance companies are able to keep premiums fairly low.
Term insurance in the digital world.
Competition has also helped lower prices. Now that people can quickly and easily compare premiums and term insurance policies online, it’s no longer as difficult to find the best policy for their money. This means that companies have to be fairly competitive in order to keep customers.
What do these lower premiums mean for you? It means now is the best time to go out and buy term life insurance! It’s also a good time to look at your policies and see if you can find a better option.
Start at TERMdog and do some comparison-shopping to see if you can find a lower premium or a policy that offers a better payout. If you haven’t looked at premiums in several years, you may be surprised at how inexpensive they really are.