Life insurance provides the insured’s beneficiaries a cash settlement upon death. The primary motive for obtaining life insurance is to financially protect family or close friends from an unexpected death.
So, if life insurance protects from an unexpected death, the rate for which an individual receives will depend on what his or her risks are. Obviously a person with health complications or who is older will have a greater death risk than a younger and healthier individual, which will result in a higher rate for the older or sicker insured person.
Other factors are taken in account for general life insurance rates that have nothing to do with an individual’s health status or age, such as the location where they live and world affairs. Keeping this in mind, it is interesting to read the article, “Cheaper Insurance Rates Point To Decline in Life, Business Risks” written by Liam Pleven in the November 6, 2006 edition of The Wall street Journal.
“The world seems awash in risk: nuclear rumblings in North Korea, bloodshed in Iraq, bird-flu scares, terrorism, hurricanes, corporate scandals, political uncertainty and more. But one barometer of risk -- the price of insurance -- indicates that many facets of life and business are getting less risky.”
However, life insurance rates may be taking in account the fact that Americans have weathered major death risks in the past. Granted, the September 11, 2001 terrorist attacks and Hurricane Katrina (2005) claimed many, many lives; the risk for further retaliation was thwarted.
Other than worldwide factors, events or accidents within a region of the United States have direct implications on life insurance costs.
Individuals residing in states that are consistently prone to severe hurricanes may not receive the lower rates one could receive in say, Massachusetts. But then one life-taking blizzard could change that.
The overall U.S. health risk is also accounted for.
“Car-collision claims have decreased in frequency, thanks in part to safer cars and safer driving. Workplace-injury claims are down, in part because of improved technology. Americans are living longer, meaning life insurers often face lower odds of making big payments on the term policies they write.”
While catastrophic hurricanes and earthquakes are difficult to protect against, other factors which have claimed Americans’ lives in the past are being controlled or at least contained to a lower fatality rate.
“Americans ‘are getting better at controlling risk,’ says Richard Zeckhauser, a professor of political economy at Harvard University. ‘In general, technological advance has made the world a safer place.’”
Nonetheless, life insurance rates usually run in cycles and it is not determined how long the lower rates will last. Another terrorist strike or catastrophic natural disaster will probably spike rates up once again.
“In the meantime, however, the decline in rates has been good news for many consumers and businesses. In 2001, a 40-year-old Californian man in good health could buy $500,000 of life insurance coverage for 20 years at $495 a year, says Bob Barney of Compulife Software Inc., a Nicholasville, Ky., firm whose products help compare policy prices. These days, that man might pay $460, a 7% drop.”
So, if you have been pondering obtaining life insurance to protect your family from your unexpected death but have always found an excuse of how you cannot afford it right now, stop making excuses because rate are the lowest in years.
You can lock-in the lowest possible rate now, while others may have to pay significantly more in the near future.
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