Friday, December 09, 2005

The Game of Life...

Now takes even longer to play. But that’s a good thing.
Regarding our post about lower term insurance prices, commenter John F took us to task for missing one of the most important reasons for that cost reduction: life expectancy.
And he’s right; life insurance rates are based substantially on mortality tables, which tracks life expectancy among groups of people. In a recent study, the National Center for Health Statistics found that “(t)he US life expectancy has hit an all-time high at 77.6 years.” On the one hand, this will serve to exert downward pressure on life insurance rates, which makes purchasing life insurance easier to afford.
On the other hand, the same study found that “(h)alf of Americans in the 55-to-64 age group have high blood pressure, and two in five are obese.” Aside from the obvious health risks these two problems pose, it also means that, while life insurance prices may fall, qualifying for these less expensive plans could be more difficult. Since the margins on term insurance products tend to be razor-thin, you can bet that underwriting (that is, the process by which an insurer determines how medically fit you are, and thus your actual rate, not necessarily what the agent quoted) will become correspondingly more stringent.
There’s another potential problem lying in wait, as well: as a group, Americans are living longer, and that’s good. But that also means that high ticket items like Social Security and Medicare will be paying out more dollars for more seasoned citizens. And it also means that the 30 year term insurance policy you bought at age 45 may not last the rest of your life; what happens to your plans on your 76th birthday?
More food for thought.
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