New rules governing the back-end finances of insurance companies went into effect at the start of 2017, and some companies are already in the process of lowering prices for individual term life insurance, reports Beth Pinsker for Reuters. These policies typically charge a monthly fee over a number of years and provide a payout to beneficiaries if the covered person dies.
One of the many players in the industry USAA, a financial services company that caters to customers with a connection to the military, lowered prices an average of 2.6%. Younger people, whose policies are already inexpensive, received the smallest price changes, while customers who are closer to age 60 could save around 15%.
The insurance company says that a healthy 40-year-old with a $500,000 policy for 20 years would pay $36.65 per month now for a typical policy, down 1.1% from last year’s pricing. A 60-year-old healthy male with the same policy parameters would pay $423 a month, down 10%.
It usually takes three to four months for companies to file required paperwork to make changes and other insurance companies will likely follow USAA. The price changes became possible because of a process called “principle-based reserving”. It changes the formula for figuring out how much money insurance companies have to put aside to pay off future claims.
Insurance companies across the 46 states that so far have agreed to the changes have three years to right-size their reserve funds. Whether or not individual insurance companies raise or lower prices for new term life insurance policies is not regulated. Prices are set on a case-by-case basis.
An insurance company pricing depends on how it calculated their reserves prior to the changes. Some might not have a savings, while others might not choose to pass savings onto consumers. Reuters quotes Patricia Born, a professor specializing in insurance at Florida State University’s College of Business who says that “the general consensus is that rates are going to come down.
Life Insurance At lower Rates
To find an individual term life insurance policy is an easy process. To switch from one insurer to new one or from an existing policy to a new one is also not complicated, according to Patricia Born. she says that there are many websites that aggregate price quotes if the user fills in a form with some of personal information. Some of those are USInsuranceAgents.com, Nerdwallet.com and InsuranceQuotes.com.
70% of Americans have any kind of life insurance, according to the life insurance research group Limra. Half of all life insurance policies are employer group policies that don’t often offer the recommended level of coverage.