A lot has changed in 20 years. Life insurance companies run differently now than they did two decades ago.
If you buy life insurance now, you’ll be able to take advantage of a 20-year low in rates. You’ll get the same guaranteed payout to your beneficiaries upon your death and you don’t have to compromise when it comes to choosing the policy that best meets your needs. So how can life insurance companies afford to continually lower their rates?
Advanced technology allows companies to make better guesses about mortality
Insurance companies use an actuarial table to estimate the life expectancy of a potential policyholder. This helps them understand how many claims they may need to pay out as a company soon. The underwriting process changed dramatically 20 years ago. When you apply for life insurance, expanded actuarial tables use your health history as well as the current state of your health to be more specific when they estimate your life expectancy. This allows them to be more accurate when they set your premiums, as well.
Better healthcare and important advancements in the treatment of diseases helps people live longer
Medical conditions like cancer, diabetes, and AIDS aren’t deal breakers for insurance companies anymore. Medical improvements help people suffering from a disease much more likely to recover or live with the condition longer than they would have 20 years ago.
People with diseases and medical conditions who’ve been denied by an insurance company in the past have a better chance of getting coverage than ever before.
When people live longer, insurance companies are less likely to have to pay the lump sum benefit on their life insurance policy. Insurers can afford to lower premiums when their financial predictions include lower payout amounts.
Technology allows some insurance companies to lower their costs
Insurance companies used to look back at historical life expectancies to make predictions governing their rates. Now, they have much more information to work with.
Using information about the past as well as data to help them more accurately predict the future, these companies construct actuarial tables that help them save money on payouts. Predicted trends, information gathered from wearable technology, and electronic medical records affect life insurance rates. They pass the savings on to customers.
Insurance companies are more efficient now than ever. This means that when you are shopping for life insurance, you’ll get more accurate quotes and faster coverage than ever before. New insurance companies may operate completely online, allowing them to offer the services their customers need with low overhead costs.
Blockchains play a huge part in how modern life insurance companies make beneficiaries their priority. On-time disbursement of claims, better fraud detection processes, and fewer touchpoints make the death claims process easier.
New regulations allow insurance companies to keep less money on hand
In January of 2017, 46 states adopted a new set of rules that allow more flexibility with the amount of money life insurance companies must keep on hand. Of course, it’s important for them to be able to pay a benefit quickly when one of their policyholders dies.
The new rules require life insurance companies to keep enough money on hand to pay death benefits and there are other laws in place that protect consumers in the unlikely event that their insurance company goes bankrupt. Experts estimate that 86% of the entire life insurance market will be affected by the new principal-based reserving guidelines.
Term life insurance policies now require a lower reserve than permanent policies, so if you are shopping for a term policy, you’ll get historically low premium rates. Due to the reserve requirement drop, new life insurance customers will pay between 3% and 15% less for their policies.
Falling policy premiums aren’t retroactive
You won’t experience a rate drop for your current insurance policies. To take advantage of historically low rates now is the perfect time to consider insuring your other family members.
Many parents purchase small life insurance policies for their children to protect the family finances from burial and funeral expenses. Since children don’t typically contribute to a family’s income, there’s no need to buy a larger policy. Having a life insurance policy to cover death-related expenses is a wise move, though.
If one spouse is a stay-at-home parent, make sure you have enough life insurance to hire someone to take care of the kids and house in the event of their untimely death. Many parents overlook the value that an at-home parent brings to the family and they forget to insure for it.
Buying multiple life insurance policies may be a smart move
Even if you already have life insurance, there may be good reasons to purchase additional policies. For example, if a 30-year old male currently has a $200,000 term policy that he purchased before he was married and had two children, he may wish he had more coverage.
At age 45, when the kids are off to college and his 15-year mortgage is paid off, $200,000 may be an adequate amount. This married father of two can better protect his family from the financial devastation of his death and prevent them from having to move out of the family home by purchasing an additional $500,000 life insurance policy with a 15-year term. He may also want to purchase two $15,000 life insurance policies on his children with a 20-year term.
A 30-year-old woman with a life insurance policy subsidized by her employer may not need an additional benefit amount. However, she’s working part-time on her side business and dreams of making it her full-time occupation. Every year she waits to purchase a term life insurance policy means she’ll pay 10-15% more in premiums. Now is the perfect time to buy an additional policy.
Right before you start a family, when you get married, and when you buy a home are traditionally the best times to purchase life insurance. With historically low rates, now is the perfect time to reevaluate your financial situation and find out exactly how much a term life policy would cost. You can get a quick and accurate quote from Ethos, right now.