Life Insurance Rates

by: Matthew Bourne

Life insurance at the present time is very affordable. Competition in the life insurance market together with the cost savings that life companies are making by operating on the Internet has depressed insurance rates, bringing them down to historic low levels. For a healthy non-smoker in their 20s, life insurance rates can in fact be as cheap as £5 per month!

However, there are many factors that influence the final outcome of the life insurance rates for any one individual. Everything from hereditary diseases to diet will figure and, depending upon the answers that we give to the insurance company, will see our life insurance rates climb higher or drop lower than the average rates for our age.

So, just what factors will affect the insurance rates that a life company will quote for life insurance? Here is a summary of the most important elements to consider: -

Age - The younger you are the lower your life insurance rates; the older you are the higher your insurance rates. Young people are seen overall as less of a risk to the life insurance company than older people. This is because the life company simply anticipates that young people with live longer than older people over a finite time from the current date forward. As a result, young people will contribute a higher number of monthly insurance payments before they die than will older people over the same timescale.

If you're in your 40s or 50s and lead a very active and healthy lifestyle this age-bias may seem a little unfair. However, given that a 25 year-old may clock up more than fifty years of monthly repayments to reach the age of 75, you on the other hand would only complete twenty-five to thirty-five years worth of repayments to reach the same age. When factored in with the increasing likelihood of death the further we get to our life expectancy limit - so heightening the risk that life companies take on paying out - it is quite easy to see why life insurance rates are bumped up to compensate as we get older.

Smoking - Non-smokers have lower life insurance policy rates than do smokers. In fact, should a smoker quit and then take out life insurance they could save as much as 50% on their insurance rates. If you are thinking of quitting though it is important to check your life insurance policy, as some insurers will not reduce the rates if you quit during the life of the policy, forcing you to change insurance company if you want to benefit from non-smoker rates.

Pre-existing Health Conditions - Hereditary diseases, especially those that run through both sides of the family, may have a significant impact on rates quoted for life insurance. Also, if you are required to attend a medical and are found to be less healthy than the 'average' for your age, then insurance rates are likely to be more expensive.

Your Life Insurance May Be Worth More Than You Think

by: Matthew Tuttle


Many seniors own life insurance policies that they no longer need or want, or that they can no longer afford. Often, they allow their policies to lapse or cash them into the insurance company for the surrender value. What many seniors don’t realize is that their unwanted life insurance may be worth much more if sold to an investor in a life settlement. A Life Settlement is the sale of a life insurance policy by the policyowner, before the policy matures. Such a sale, at a price discounted from the face amount of the policy, but in excess of the cash surrender value, provides the seller an immediate cash settlement.

Life Settlement History

Life Settlement industry evolved out of Viatical Settlements.

In the mid-80’s AIDS became an epidemic, A number of AIDS patients were told that they only had a limited time to live. Many of these patients owned life insurance policies. They knew that when they died, their family would receive the death benefit but they needed money today to pay medical bills or enjoy the rest of their lives. In stepped Viatical Settlement companies. These companies purchased policies on terminal patients and sold them as retail investments to individual investors. The AIDS patients got money they needed today and the investors got the promise that when the patient died they would get the death benefit.

The Life Settlement Market

In the 90’s the Life Settlement market was born as companies and investors turned towards buying unwanted life insurance policies from seniors. According to Sanford Bernstein, the industry grew from $0 in the mid 1990’s to approximately $13 billion in 2005. Bernstein estimates the life settlement market will reach $160 billion over the next several years. The penetration rate is expected to exceed 20% as awareness and the size of the market is increased over the next 20 years.

Life Settlement Case Studies

Below are some real life case studies that illustrate ways that others have used life settlements to increase their net worth:

Case 1:

Settlement Frees up $966,000 in Cash for Annuity purchase

 This case involved an 82 year old female who owned several policies totaling $4.6 million. She no longer wanted to pay premiums for the insurance and was going to accept the cash surrender value of $236,548. Her intent was to use the policies’ cash value to help fund the cost of an assisted living facility.

 Her advisor recommended a life settlement for each policy, and she agreed. Ultimately she received a settlement of $966,000 – more than 400% greater than the cash surrender value – and used those funds to purchase an annuity. The annuity payments now help cover the costs of the assisted living facility.

Case 2:

Settlement Proceeds Stabilizes Trust

 This case involved an 81 year old female, owner of a $5 million life insurance policy with a surrender value of $196,866. Since the insured had lost interest in maintaining the policy and no longer wished to make gifts to the trust for premium payments, the cash surrender value was rapidly depleting as premiums were being deducted from the cash value. Working with her financial advisor they conducted a review to determine whether the policy should be surrendered or whether a Life Settlement would be more advantageous. The advisor provided an offer of $556,000 – over three times the cash surrender value.

Case 3:

Settlement Allows Policyowner To Purchase Paid-Up Policy

 A 78 year old male decided to allow his $1,250,000 policy to lapse. He had significant medical expenses and could no longer justify the $39,536 annual premium. After reviewing the available options with his advisor they decided to pursue a Life Settlement. He was able to secure an offer of $490,000. The policyowner and advisor decided to use some of the proceeds to purchase a paid-up $500,000 policy and the remainder helped to ease the burden of the policyowner’s medical costs.

Case 4:

Policyowner Makes $797,000

• A 74 year old in good health purchased a $10mm Life Insurance Policy. He paid-$536k for two years of premiums. After the policy is two years old, he sold the policy for $1,333,333 in the secondary market representing a $797,000 profit on his investment.

If you are 70 and over, and have an insurance policy that you were going to get rid of anyway, you owe it to yourself to explore whether a life settlement might be a better option.