Term life insurance costs a lot less now than it did 20 years ago.
I got a rate book from one of the best and biggest life insurance companies a couple of weeks ago. I was just looking through the pages when I noticed that the premiums for term insurance looked really high. I decided to compare the insurance premiums of today with those of the past. The results were a big shock.
Even though I knew that insurance companies had cut premiums for term life insurance by a lot, I didn't know that the difference was so big. In many cases, the premiums for 2007 are a third of what they were in 1987, and in some cases they are even less than a quarter of what they were in 1987. That's a big difference. What gives?
I'm not an actuary or a statistician, but based on what has happened in the industry over that time, it seems like the rise in demand for term insurance has had a huge effect on the price. At the moment, everyone wants term insurance. Some people know that they might need to switch to a permanent policy in the future, but others have no plans to buy any other kind of insurance.
At this point, I won't argue about which side is right because the point of this article is to show how much term premium rates have dropped. I do think, though, that I should talk about which policies people buy the most and why. This is meant to help the reader.
Most people buy 10 year, 20 year, or 30 year term policies, with the 20 year term policy being the best. By the time you're 30 or 35, you've probably got a pretty good handle on your money. You have been successful in some way. You might already be married, or you might be thinking about getting married. You want to have kids, and you realise that you'll need life insurance. You think, "Why not buy it now while you can still get it at a low rate and still qualify?" With these plans in mind, you find that 20-year or 30-year term policies could meet your needs.
If you became financially stable later in life and your kids are in their teens, you might think that the 10-year term policy is the best option.
No matter what your situation is now, you will need to buy more life insurance at some point. Your term policies might soon end. No matter what, they will run out at some point. If your health is still good, you can start a new term life insurance policy with a higher premium than the one you already have.
On the other hand, insurance companies let you change your term policy to a permanent one within a certain time frame. You can switch to a permanent policy if you are still within that time frame. A universal life policy would be a good choice. I suggest this because it can be used in many ways. You can also switch to whole life, but the premium will be higher.
Overall, anyone who needs life insurance today has no reason not to have a policy. The rates are so cheap.
