DENVER, Jan. 22 — The price of term life insurance is dropping. According to a recent report by the Insurance Information Institute, term-life premiums have declined 50 percent in the last 10 years, an average of about 5 percent per year. In 2007, they are expected to drop another 4 percent.
Premiums are dropping for several reasons. People are living longer due to health care advances, better personal care, and increased safety features in automobiles. Automation advances have made operating costs less for many insurance providers, along with improved risk selection. The internet has made it easier for insurance customers to price shop.
AAA Colorado has designated January as Insurance Review Month to remind everyone that an annual review of all insurance coverage is critical for safety, security and peace of mind. Following is life insurance information from AAA Colorado, one of the largest agencies in the state specializing in personal lines of insurance.
Why life insurance Life insurance is designed to provide a family with security in the event of the death of a spouse or parent. “It’s easy for people to imagine having an unexpected major expense for car or house damage. Not enough people consider protection in the tragic case of a parent dying or death of a spouse,” said Jim Rookard AAA Colorado director insurance services and distribution, CPCU, CLU. Consider how your family would cover burial expenses, the loss of income, and possibly children’s child care or college expenses. These considerations reflect why life insurance is just as important as buying car or home insurance.
A common formula used to determine how much coverage you need is to take your annual salary and multiply it by eight. Another common method is to add up your family’s monthly ongoing expenses and divide the total by .07 to find the lump sum necessary to cover such expenses annually. Add to that amount any money you’ll need for one-time expenses and you have a rough idea of the life insurance coverage needed. A calculator only allows you to perform hypotheticals; it cannot provide final answers. That’s why it’s always important to discuss your family’s needs with a trusted agent before determining coverage.
What kind of life insurance
Term life and permanent (or cash value) insurance are the two most common life insurance products available. Term life is often less expensive but isn’t necessarily the best choice for each individual. Term life provides insurance coverage for a specific period of years. It provides insurance coverage only and does not accumulate cash value or pay dividends.
Permanent does accumulate cash value and many policies allow you to borrow against the insurance coverage for major expenses such as college or a new home.
Permanent is often better suited for people in their 20’s or 30’s. Term life is often less expensive and more advantageous for people in their 40’s. Always consult a trusted insurance agent from a financially strong insurance provider to discuss which insurance product is the best individual fit.
For more insurance information visit www.rmiia.org (website for the Rocky Mountain Insurance Information Association, a non-profit insurance communications organization) or www.aaa.com and click on “Insurance/Financial.”
Note to Media: This is the last of four informative pieces to highlight January as Insurance Review Month—AAA's reminder to everyone that an annual review of all insurance coverage is critical for safety, security and peace of mind. To review all four articles go to aaa.com and click on “News and Safety.” For more information please contact Eric Escudero, Public Relations Manager, 303-210-2904; firstname.lastname@example.org.
AAA Colorado reaches one in four households in the state and is an advocate for safety and security for all travelers. As North America’s largest motoring and leisure travel organization, AAA provides nearly 50 million members with travel, insurance, financial and automotive-related services, as well as member-exclusive savings.
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