Last fall you may have read an article about the NAIC Regulation known as "Triple XXX." The National Association of Insurance Commissions is the organization comprised of insurance regulators from all 50 states. The NAIC provides a forum for the development of uniform policy when uniformity is appropriate.
Prior to January 1, 2000, consumers could buy term life insurance policies with premiums that were guaranteed to be level and not to increase for 10, 15, 20, and 30 years or more. Intense competition and the ability to underwrite policies in more detail had driven rates to their lowest level in history.
However, the insurance commissioners around the country felt that reserves were too low and some companies may become insolvent when claims are filed. To correct this situation Triple XXX Guidelines were adopted. The Guidelines force the companies to set more money in reserve for each policy it sells, thus forcing the company to charge higher premiums.
Generally, premiums for 10-year level term plans have stayed relatively the same or have even been reduced slightly by some carriers. Term plans that guaranteed rates for 15 years or longer have increased from 20 to 70%.
What's a consumer to do? Term life used to be a simple product to understand. Now some companies are offering two types of level term plans. One series will generally guarantee rates for 5 or 10 years and then the premiums are expected to remain level. The second series, which will cost more, will offer a true guarantee for the full level term period of the policy; i.e. a 15-year plan guarantees rates for the full 15 years.
Shopping for term life used to be easy and you could shop on premium alone. Now, you need to be able to compare the product and features of the plan and make sure you are comparing apples to apples. Always remember to consider the company's financial strength and the conversion feature (the provision that allows you to convert your term life to a form of permanent life insurance).
Most importantly, you must spend some time reviewing your needs for coverage. The need for life insurance varies widely from one person to the next. First, consider the economic loss your survivors will suffer at your death. How will they replace your income, pay off debts including a mortgage, provide for college, plan for retirement, and meet other objectives you have set for your family?
Another item most consumers do not take into consideration when shopping for coverage is their health history. Everyone likes to get the lowest rate, however not everyone is eligible based on previous and current medical history. Carriers may underwrite certain medical conditions differently. For instance, some carriers can offer preferred rates to an applicant who has been treated for hypertension while others will not. So, one carrier may quote a lower rate, yet the applicant will not qualify for that premium.
In addition, your professional group offers both a group life and individual life program. The group life program offers group rates to individual members and can provide savings depending on your age, medical history, and the time period you need to cover. On the other hand, an individual plan will allow you to lock in rates for a guaranteed length of time that matches your needs.
Insurance shopping is becoming a more difficult task, and consumers need to be nearly as knowledgeable as the insurance professionals in order to make good decisions. Your insurance agent is a good source of general information about life insurance.
USI Colburn Insurance Service, is the endorsed insurance administrator for many state and local trade and chamber of commerce organizations. Mike Levandowski and Dennis McGee, ChFC are Account Executives at USI Colburn Insurance Service.
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