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Do life insurance rates increase during a recession?

With stock market fluctuations and a possible recession looming, it’s natural to wonder if it might affect life insurance rates.

If you had “buy life insurance” on the to-do list for 2020, you might be asking yourself whether it’s still a good time to take out a life insurance policy. We’re going to be experiencing the effects of the COVID-19 pandemic for a while, after all — and those effects already include an economic recession, at least in the short term. Does that mean it’s a bad time to buy a life insurance policy? Are you going to get stuck paying higher rates for coverage?

Not necessarily. Recessions don’t affect life insurance policy rates as much as you might think, especially if you elect to protect your family with a term life insurance policy. Whether or not there is economic uncertainty,  buying life insurance now, when you need it, is still a smart financial move.

Here’s what you need to know about how life insurance companies price their policies, why term life insurance policies are less affected by economic fluctuations than permanent life insurance policies, and what you can do to get the most affordable life insurance policy possible.

In this article:

How life insurance companies price their policies

Your life insurance premium rate is determined by your age, health history and tobacco use. However, life insurance policy rates, as a whole, are determined by the profitability of a life insurance company, which is generally affected by three main factors: mortality rates, company expenses and the interest rate environment. “If you have a change in any of these three components, it will impact a life insurance company’s profitability,” explains Aneesha Deshpande, head of product innovation at Haven Life. When a company’s profitability goes down, its policy rates might go up.

That said, short-term economic volatility doesn’t typically affect life insurance policy rates. “Life insurance companies have investment managers that are prepared for these short-term fluctuations, and are generally able to handle them without a rate impact,” Deshpande says. If an economic recession looks like it might last for a longer period of time, life insurance companies might begin to increase rates to maintain profitability — but if this happens, term life insurance policies will experience smaller rate increases than permanent life insurance policies.

For example, a healthy 35-year-old woman can buy a 20-year, $500,000 term life insurance policy through Haven Life for about $20 per month. If term life insurance rates were to increase by 5%, that woman’s premium would be about $21.

Term life insurance rates generally remain stable

Term life insurance policy rates tend to remain stable even during periods of financial crisis. Why? Because these policies cover individuals for a short period of time relative to permanent insurance — usually 10, 15, 20 or 30 years, depending on the coverage you choose. Permanent policies, on the other hand, cover you for a lifetime, so as long as your coverage remains in good standing, there is a 100% chance the insurance company will pay out a death benefit at some point.

These shorter term lengths protect both the consumer and the life insurance company from economic fluctuations, Deshpande says, because “term products are less severely impacted by low-interest-rate environments” than permanent life insurance policies. (See more on that below.)

This is why life insurance companies are comfortable offering affordable term life insurance policies even during recessions and when people are unemployed. Since each policy provides coverage for a defined period of time, the insurer isn’t taking on as much risk that they’ll lose money if the economy declines long-term.

Consumers also get to benefit from the low risk factor that affordable level premium term policies provide —  once you complete your term life insurance application, you’ll secure a monthly premium that will remain constant for the length of your insurance policy.

Your term life insurance premium won’t change

When you buy level premium term life insurance, you lock in your premium rate for the length of the term — called “guaranteed level premiums.” In other words: If you buy a 10-year term life insurance policy, you pay the same monthly premium for the full 10 years, no matter what happens to the economy during that period. If you decide to protect your family with a 30-year term life insurance policy, your premium rate will stay the same, every month, for thirty years.

How many other products can offer the same guarantee? Term life insurance is designed to fit into nearly every budget, and the security of knowing that your premiums won’t increase due to inflation, recession or any other economic issue can provide just as much peace of mind as the policy itself.

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Permanent life insurance can become more expensive during economic uncertainty

Unlike less interest rate sensitive products like term life insurance, permanent life insurance policies — common types being universal or whole life insurance — are more likely to see rate fluctuations during a period of economic uncertainty. “Permanent life insurance policies protect the policyholder for a lifetime and some products offer long-term cash value guarantees,” Deshpande says. “These guarantees can be costly for life insurance companies in the current market environment.” In a lower interest rate environment paired with economic uncertainty, life insurance companies can be impacted by reduced profitability or even losses on these products, and as a result, rates will likely increase.

Deshpande also notes that premiums will not change for existing permanent life insurance policyholders with level premiums — which is the case for most whole life insurance policies. However, some universal life insurance products may have premiums projected based on a higher assumed rate of return than is the current reality. Permanent policyholders should review their coverage with a financial professional to ensure policies don’t lapse prematurely and to understand how a low-interest-rate environment may impact their coverage.

Buying term life insurance early can save you money over time

The best way to keep your life insurance rates low is to buy your term life insurance policy early. Signing up for a term life insurance policy when you’re young and healthy can save you a lot of money over time — and if you’d like to see just how much money you can save, here’s a chart showing typical monthly premium costs for a 20-year, $500,000 Haven Term policy for individuals in excellent health at various ages. Notice how the premiums go up as you get older?

Quotes for term life insurance

AgeGenderTerm lengthFace amountPremium
Source: Haven Life Insurance Agency (Haven Life)

Buying life insurance now can help you get the best possible rate — and remember, you’ll be paying that same rate for the length of your policy, whether that’s 10, 15, 20 or 30 years.

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What about life insurance ratings?

If you’ve been paying attention to life insurance industry news — what, you haven’t? — you might have noticed that Moody’s recently downgraded the life insurance sector from stable to negative. Does that mean it’s a bad time to buy life insurance? Nope. “Moody’s publishes these outlooks on a sector-by-sector basis,” Deshpande says. “It does not speak to specific credit ratings for individual companies.” Haven Life’s parent company, MassMutual, remains one of the top-rated life insurance companies, with an A++ rating from A.M. Best, AA+ ratings from Fitch and Standard & Poor’s (S&P) and an Aa3 rating from Moody’s (as of May 1, 2020).

No matter what the rest of the economy is doing, a low-cost term life insurance policy is often a must-have for families, as it provides a financial safety net to your loved ones if you were to die. Although life insurance premium rates might fluctuate slightly as federal interest rates go up and down, term life insurance is designed to remain as affordable as possible for young families — and the sooner you apply for your term life insurance policy, the sooner you’ll be able to lock in your monthly premiums for the next 10, 15, 20 or 30 years, come what may.

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About Nicole Dieker

Nicole Dieker has been a full-time freelance writer since 2012, with a focus on personal finance and habit formation. In addition to Haven Life, her work regularly appears at Lifehacker, Bankrate,, and Vox. Dieker spent five years as a writer and editor for The Billfold, a personal finance blog where people had honest conversations about money, and is the author of Frugal and the Beast: And Other Financial Fairy Tales.

Read more by Nicole Dieker

Our editorial policy

Haven Life is a customer-centric life insurance agency that’s backed and wholly owned by Massachusetts Mutual Life Insurance Company (MassMutual). We believe navigating decisions about life insurance, your personal finances and overall wellness can be refreshingly simple.

Our editorial policy

Haven Life is a customer centric life insurance agency that’s backed and wholly owned by Massachusetts Mutual Life Insurance Company (MassMutual). We believe navigating decisions about life insurance, your personal finances and overall wellness can be refreshingly simple.

Our content is created for educational purposes only. Haven Life does not endorse the companies, products, services or strategies discussed here, but we hope they can make your life a little less hard if they are a fit for your situation.

Haven Life is not authorized to give tax, legal or investment advice. This material is not intended to provide, and should not be relied on for tax, legal, or investment advice. Individuals are encouraged to seed advice from their own tax or legal counsel.

Our disclosures

Haven Term is a Term Life Insurance Policy (DTC and ICC17DTC in certain states, including NC) issued by Massachusetts Mutual Life Insurance Company (MassMutual), Springfield, MA 01111-0001 and offered exclusively through Haven Life Insurance Agency, LLC. In NY, Haven Term is DTC-NY 1017. In CA, Haven Term is DTC-CA 042017. Haven Term Simplified is a Simplified Issue Term Life Insurance Policy (ICC19PCM-SI 0819 in certain states, including NC) issued by the C.M. Life Insurance Company, Enfield, CT 06082. Policy and rider form numbers and features may vary by state and may not be available in all states. Our Agency license number in California is OK71922 and in Arkansas 100139527.

MassMutual is rated by A.M. Best Company as A++ (Superior; Top category of 15). The rating is as of Aril 1, 2020 and is subject to change. MassMutual has received different ratings from other rating agencies.

Haven Life Plus (Plus) is the marketing name for the Plus rider, which is included as part of the Haven Term policy and offers access to additional services and benefits at no cost or at a discount. The rider is not available in every state and is subject to change at any time. Neither Haven Life nor MassMutual are responsible for the provision of the benefits and services made accessible under the Plus Rider, which are provided by third party vendors (partners). For more information about Haven Life Plus, please visit:

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