Time to check term life rate

Your Money

November 27, 2005|By GREGORY KARP | GREGORY KARP,THE MORNING CALL

The time is right to recheck your term life insurance rate, because these rates are expected to drop another 3 percentage points in 2006, according to the Insurance Information Institute.

A term policy that in 1994 cost $1,300 will cost just $641 next year, according to AccuQuote.com. The biggest savings will come for people who have term policies started before 1999, when rates were significantly higher.

If you didn't refinance a 1994 rate and kept paying premiums for another 20 years, you would have wasted $13,180.

"It's been a remarkable drop," said Byron Udell, founder and chief executive of AccuQuote. "If you bought your policy before 1999, you should be looking at it."

Term life insurance pays out a certain amount of money, say $500,000, if you die during a certain time period, say over the next 20 years. For most people, term life insurance is the best type of policy.

Here are some questions to ask about switching term policies:

What will it cost me?

The beauty of buying a new term policy and canceling the old one is it's free.

How do I do it?

Do things in the correct order. Activate your new life insurance policy before canceling the old one.

What are my choices?

Because rates are lower, you could opt to pay roughly the same premium but get a longer term, say 30 years instead of 20. Or you could get a policy that covers you for the balance of the original term and pocket the saved money each month.

How do I compare prices?

You could go the traditional route of calling several life insurance companies. But it's more efficient to use online comparison services, including AccuQuote.com, Term4Sale.com, InsWeb.com, Insure.com and YouDecide.com.

Does the insurance company matter?

Not if you're choosing among highly rated companies. Term life insurance is a straightforward contract, so the brand name doesn't matter much. Shop by price and check reports at a rating agency, such as A.M. Best (www.ambest.com).

Reports are free, just for registering.

What if I bought a policy after 1999?

You still could save money by shopping around. Rates among insurance companies can vary by hundreds of dollars for the same term policies.

Are there downsides?

There are few reasons not to trade in a policy, unless you have a recent one and you consider the savings too small to warrant the trouble of researching rates and swapping policies.

Gregory Karp writes for The Morning Call in Allentown, Pa.

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