Why life insurance is cheaper than ever

Chances are, there’s very little you spend money on now that’s cheaper than it used to be. Sure, you buy less physical media than before, but that hardly offsets the way everything else, from rent and gas to a gallon of milk, keeps going up. In fact, for many Americans, wage gains are being rendered meaningless by inflation. But you know what is cheaper than it used to be? Term life insurance.

One reason for this is technology. While it’s true that life insurance companies no longer consider the abacus to be cutting edge, it’s fair to say the industry has historically been slow to embrace tech. Recently, however, that has changed. Some innovators now use algorithms for the grunt work involved in medical underwriting, and digitally gather industry standard applicant data – from credit information to prescription details – from digital third-party sources. Measures like these help life insurance companies more accurately price policies and significantly reduce overhead costs for issuing a policy. Translation: more competitive pricing for consumers.

The industry’s embrace of tech doesn’t just have the capability to save people money; it can also save them time. It used to take months for a life insurance company to issue a final decision on coverage eligibility and pricing. But now it more commonly takes a couple of weeks, and if you use one of the small number of firms that do “algorithmic underwriting,” it can be even quicker. At Haven Life, for example, many applicants can get an instant decision on coverage eligibility, and, if approved, have a policy in place that day. Also, thanks to technology, pricing is becoming increasingly personalized for you with medically underwritten policies, which is good news for people with healthy lifestyles.

Life insurance also costs less than it used to be because the companies that provide it have more ways to make money than they used to. Like banks, life insurance companies generate profits partially by investing the cash their customers pay them, and there are rules in place to make sure they keep enough on hand (“reserves”) to pay out claims. For a long time, those rules were pretty much one-size-fits-all, but at the start of last year, 46 states changed their laws to allow insurers more flexibility in how they calculate their reserves. The result of this (“principal-based reserving”) is that many insurers – particularly life insurance companies – can now invest more of the cash they have, which in turn means they can afford to lower their premiums.

So, you might ask, “If life insurance rates keep going down, should I wait a couple of years before I get mine?”

It’s a good question, and the answer is a resounding “no.”

Although prices, in general, may continue to fall, the price that you, personally, will have to pay increases with your age, rising about 10% every year. (You can see this for yourself by entering information like age, health and desired coverage amount in the Haven Life quote tool and adjusting your date of birth up or down by a year.) So, your own personal rate is most probably as cheap now as it will ever be. Or, the younger and healthier you are.

There aren’t many bargains left out there, so when you see one, it’s best to grab it while you can.

Michael Davis is a freelance writer and editor who has covered everything from fashion and music to parenting, work, and finance. He has been a chef, restaurateur and record label owner.