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If you are in the market to purchase life insurance, now may be the best time to move forward. There are several factors that a prospective buyer should consider. Below, we'll explore all of the important reasons you should consider contacting your insurance professional today.

"The best time to plant a tree was 20 years ago. The second best time is now." - Chinese Proverb

Best Time to Purchase Life Insurance

life insurance

Life insurance costs are based on many factors, but one of the main factors is your age. You can get life insurance from any age, 0-90 (however some limit coverage to 85). As you get older, the cost of life insurance rises. By purchasing life insurance today, you will lock in your cost; waiting could affect that cost. 

You Are Not Getting Any Younger (or healthier)

Although life insurance is available at older ages, there are some companies which restrict age groups. Mutual of Omaha Insurance and Penn Mutual Life Insurance are momentarily suspending applications for individuals aged 70 or older, and Securian Financial has stopped taking applications from those aged 71 and older until at least June 15, 2020. (See article: Certain US Life Insurers Suspend Senior Applications). These restrictions are not expected to be permanent and are attributed to the uncertainty of the impact of COVID-19.

Another important factor is your health. If you are healthy today, then by securing coverage now, you are locking in your current health. If your health deteriorates, not only will the cost go up, it may someday get to the point where you can no longer secure any insurance.

myth of buying term life insurance and investing the difference

Current Economic Conditions

It would be easy to assume these changes are driven solely by COVID-19. There are other issues impacting the life insurance industry, namely interest rates. Insurance companies are dealing with a sustained low interest environment. The lower interest rates are affecting insurance company pricing.

Using the Moody's Seasoned AAA Corporate Bond Yield as a measure of interest rates, you will see just how low interest rates are today. In January 2000, the rate was over 7%. This was down from its peak of over 15% in the 80's, and has been declining ever since. In 2010 the rate dropped to 5%, and today it is under 2.5%. 

Since actuaries have to account for the current interest environment, we are starting to see a trend in repricing of today's policies. In particular the policies that are guaranteeing the death benefit—Guaranteed Universal Life.

Guaranteed Universal Life: Re-Pricing

In the past when a company announced a new product, it was good news. Typically the policy provided lower cost or more benefit for the same premium dollar. Improvements in mortality and technology along with product innovation were the main driver.

Today however, the new products are becoming more expensive. The extra cost has not been from any mortality increases (it is too early to know if COVID-19 will impact the insured population.) The increase is driven almost exclusively due to the low interest environment.

Several carriers are announcing product changes to their Guaranteed Universal Life (GUL) products. GUL's are designed to guarantee a death benefit for a specified premium. As long as the client pays a premium, the policy is guaranteed to stay in force and pay the death benefit once the insured passes away.

Recently some major carriers (Lincoln National, AIG, and Pacific Life) have announced their pricing increases to their GUL products. The increases are in the 15% range with some of them already in place. As these companies announce the price increases it wont be long before the competition follow suit.

The Best Time is Now3-4 New Regulation

You still have time to lock in current pricing for some (not all) GUL contracts. Even if you are not interested in a GUL, but would like to get life insurance, now is still the best time. The process of securing coverage has gotten easier with the advent of electronic application processes and express underwriting.

Driven by technology, competition, and now the current lock down, underwriting is becoming easier. Companies are relaxing their standards on medical exams by accessing information they can obtain through medical databases. In some cases you can get up to $3,000,000 in coverage without having to get a medical exam.

Next Step

Take advantage of the time you have now to look at your life insurance coverage. We would be happy to review the amount and type of insurance you currently have. If you need help getting additional coverage, we can help you find the right type of coverage with the right company - before prices go up! Contact the Advisor's Resource team today. 

Post by The Advisor's Resource Team
June 22, 2020