NEW YORK, February 20, 2007 — Technology and a highly competitive marketplace have made it easier than ever for consumers to shop around for the right life insurance company, according to the Insurance Information Institute (I.I.I.).
“The goal is to find a financially stable company with a solid reputation for consumer service,” said Dr. Steven Weisbart, a vice president and economist at the I.I.I. “With hundreds of insurers offering policies, life insurance is a highly competitive business so consumers have a number of companies and policies to choose from.”
Moreover, the I.I.I. is anticipating that term life insurance premium rates will drop 4 percent this year when compared to last year, primarily due to falling death rates for the 25-44 age group—the primary age range for purchasing life insurance—over the past 10 years.
The I.I.I. estimates that, for example, the annual premium for a 40-year-old male nonsmoker buying a $500,000 20-year level term life insurance policy in 2007 will be $615 if he qualifies as a “standard” risk and $340 if he meets the more stringent requirements of a “preferred” risk. For groups such as women and younger people, premiums would be even lower still. And for people who buy sufficiently large amounts of insurance, the rate per $1000 of insurance will be lower. For example, buying twice as much coverage will increase the premium but by less than double.
Premium rates for traditional whole life, universal life, and variable universal life insurance are also expected to be lower in 2007. The premiums for these products—which are designed to pay a death benefit no matter when the insured person dies—are driven by expected investment returns as well as by the same forces that affect term rates, Dr. Weisbart said.
In order to help consumers select a life insurance company, the I.I.I. offers a “Find a Company” tool on its Web site, http://www.iii.org. The information offers direct Web links to randomly selected licensed insurers in each state.
I.I.I. recommends that consumers focus on four criteria during their search:
- Price: Premiums for life insurance vary from company to company and consumers should of course compare prices before buying a policy. The insurer will want to know the age of potential policyholders, the type of policy they’re seeking (term or permanent), and the amount of insurance they wish to purchase. The latter figure will determine what a policyholder’s beneficiaries receive, should he or she die.
- Budget: Paying for life insurance is often a long-term commitment. Consumers need to make sure they can pay the premiums and keep whatever policy they purchase in-force.
- Insurer Stability: Ratings agencies periodically assess the financial strength of life insurers, information that can be retrieved online at Web sites such as www.ambest.com and www.moodys.com.
- Insurer Customer Service: Each state is responsible for regulating the insurance business conducted within its boundaries. In addition, many states issue publicly available reports which chronicle the number of complaints a licensed life insurer has received over a period of time, in the context of its market share. This information is often easily found on state insurance department Web sites. The Insurance Marketplace Standards Association is another excellent source of information on the topic; their Web site is http://www.imsaethics.org/.
“If you already have a life insurance policy, contact your current insurance agent or insurance company before canceling an existing policy in order to purchase a new one,” Dr. Weisbart noted. “Sometimes, switching to a new policy may be in your best interest but there may also be economic repercussions to canceling existing policies, such as surrender fees.”
If you have an existing life insurance policy, you also need to keep in mind that, if your health status has changed, you may no longer be insurable at the same rate.
“Lifestyle changes such as marriage, divorce, the birth or adoption of a child and even starting a business may alter your life insurance needs. Let your insurance agent or company representative know about these changes and make sure that they are properly reflected in your life insurance coverage,” Dr. Weisbart concluded.
For more information about life insurance, visit the Life section of the I.I.I. Web site: http://www.iii.org/individuals/life.
The I.I.I. is a nonprofit, communications organization supported by the insurance industry.