The Insurance Information Institute (III) recently reported that premium rates for term life insurance are expected to decrease slightly in 2008. The expected drop would be approximately 1 percent on average from 2007 premium rates.
Between 1994 and 1999, term life insurance rates saw an average annual drop of 15 percent. Since 2000, term life insurance rate decreases have slowed to an average of about 4 percent per year. The expected decline of 1 percent in 2008 would be the lowest in over 14 years.
There are several reasons life insurance companies have been able to decrease rates on term life insurance over the past decade plus. One reason is improvements in mortality. Simply put, death rates have consistently declined for all age groups in the primary life insurance buying range (25-55).
Another primary reason for premium rate declines is improved efficiency and cost reduction within life insurance companies. Technological advances have played a major role in both areas. Finally, increased competition has positively affected term life insurance premiums. Companies such as QuickQuote provide free comparison term life insurance quotes via the Internet to hundreds of thousands of customers each year. Insurance companies have responded by reducing premiums to position themselves better and earn a larger part of the term life insurance market.
However, the anticipated 1 percent decrease next year appears to signal the end of such rate decreases. Most life insurance companies have reduced premium rates as low as they can realistically go. It is widely expected that term life insurance premiums will remain relatively stable over the next several years.
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