insurance

Term life rates reverse, head higher

The cost of reinsurance is going up, as well, says Steven Weisbart, senior vice president and chief economist at the Insurance Information Institute. Reinsurance is a type of policy insurance companies buy to protect themselves from large or catastrophic losses.

"That is a key cost of those lines," he says. "As reinsurance gets more expensive, premiums go up."

Meanwhile, the stock market has fallen from its high in 2007. The 4 percent to 5 percent baseline investment goal can no longer be counted on, Udell says, citing the sharp downward slide the stock market has taken.

"That means insurance companies have lost the ability to be bailed out by good investment results," Weisbart says.

One thing that hasn't changed is that the Internet continues to hold down prices through aggressive competition.

As a response to these pricing pressures, for example, ING U.S. Insurance boosted their rates earlier this year, but suffered an immediate backlash from buyers, Lurty says.

"Because the market was so competitive, our increase caused us to lose some market share. People stopped buying, and we have since dropped our rates accordingly," he says.

A skyrocket it's not

While the trend reversal is interesting, industry experts stress it doesn't mean sky-high prices are coming.

"'Creeping' is probably a decent description," Weisbart says. "Airlines do this every once in a while -- they hike fares in response to rising costs and see if they can stick, only to retreat later."

Maintaining perspective is important, Udell says. "You have to remember, while we are up a little off a historical low, it is still pretty close to the lowest rates we have ever seen."

What's more, the dollar amounts involved are still relatively small, Lurty says.

"We aren't talking about a huge increase. In April we made an increase of about 5 percent. Think about something that is $20 per month, that cost may have gone up $1 per month," he says.

What should YOU do?

Industry watchers say now might be the perfect time to get off the fence and buy a term policy.

Udell says this may be an excellent time to buy. Rates are still historically low, he notes, and as people age and develop health problems the more expensive it gets, regardless of pricing trends.

That also impacts whether you should "refinance" your life insurance.

For many people, today's near-historic low prices seem tempting, especially if they had held policies for, say, 10 years. If you are still in the same or better health as you were a decade ago, dumping that old policy in favor of one with today's low rates may make sense. But if your health has deteriorated, it's probably wiser to hang on to that old policy.

"It's going to depend on each case," Lurty says.

The no-brainer decision, he says, is if you were thinking about buying more insurance, or if you didn't have any life insurance to begin with. In either case, the sooner you lock in a rate, the better, he says.

Some economists, such as Weisbart, aren't convinced today's increases mark a long-term trend.

"The economic environment will improve -- heaven knows when -- but we won't stay in this forever," Weisbart says. "Mortality will continue to improve, and along with a more favorable economy and loosening credit, all that will work against prices continuing to rise in the long-term."

What does seem to be clear, Lurty says, is that rates won't be coming down over the short run. "Over the next six months to a year, term life insurance will continue to rise," Lurty says. "Rates will clearly be higher, but how much is the matter of debate."

You can compare term life insurance quotes on Insureme.com, a Bankrate company.

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