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Published: Thursday, 10/20/2005

Life insurance rates could drop 3% next year

BY JULIE M. McKINNON
BLADE BUSINESS WRITER

Life insurance premium rates nationwide are expected to drop by 3 percent next year as Americans live longer and competition among companies increases, according to the Insurance Information Institute.

The rate drop will occur with both term and so-called permanent insurance, which includes variable and universal policies, said institute economist Steven Weisbart.

Companies such as Allstate Insurance Co. are assessing recently updated mortality tables, used to estimate how long people live and determine rates, and such calculations drive costs down, said Joseph Hernandez, owner of Hernandez Insurance in Toledo and Napoleon. The agency sells Allstate life insurance.

"People are living longer," Mr. Hernandez said. "That's the biggest thing right now."

Both Michigan and Ohio have adopted rules to update mortality tables, which increase the life expectancy of men from 70 to 74 and women from 77 to 79. The updated tables are optional in both states until 2009 when insurers must use them, spokesmen said.

Ohio has estimated rates to term insurance policies could drop as much as 30 percent with the updated mortality tables.

Even though rates for life insurance policies have been going down, government regulations requiring companies to increase reserves eventually could slightly boost rates for term policies, said insurance agent Matt Caputo of Ohio National Financial Services Caputo Agency in Toledo.

Mr. Weisbart of the insurance institute, however, predicted term rates will continue to drop.

"My feeling is that it will not end a drop," he said. "It will just make the drop smaller."

Term insurance, in which the policy holder builds no equity but just pays premiums that pay off only in the event of death, has had flat rates for the past two years or so, Mr. Weisbart said.

Next year, the annual premium for a 40-year-old man buying a $500,000, 20-year level term life insurance policy will be $641 if he qualifies as a standard risk, the institute estimates. If he would meet the more stringent requirements of being a preferred risk, his annual premium would be $352, it said.

Contact Julie M. McKinnon at:

jmckinnon@theblade.com

or 419-724-6087.


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