Term Life Insurance Articles
How Rising Interest Rates Are Affecting Universal Life Insurance Plans
2011-10-23
Although life insurance is an important product, rising costs over the last several years have spurred consumers to consider all of their options when picking an insurance product. Universal life insurance can seem like a particularly advantageous purchase, as it's an investment. After a certain point, usually age 65, universal life insurance policy holders can take money back out of their policies. This is in contrast to term life insurance policies, in which premiums aren't usually returned. However, universal life insurance is also affected by the same economic factors as other types of life insurance, and premiums may rise. Knowing how the market affects rates can be helpful when choosing a plan.
One factor is the interest rates offered on large loans. Interest rates are particularly important for the life insurance industry because life insurance companies depend on banks to back up the coverage that they offer, literally by loaning money to pay for the significant costs of life insurance claims. In order to offer more policies, they need to be able to loan more money, regardless of the type of life insurance policy. Generally, the lower the interest rates, the lower the cost of the average insurance policy. Of course, this also means that when banks aren't loaning money, rates will inevitably rise. Some buyers may be denied coverage outright, although this is unlikely for universal life insurance.
Universal life insurance is different from other types of insurance such as whole life and term life because it has an investment aspect. Again, this means that interest rates are crucial in setting the value of policies. When the economy isn't growing, a universal life insurance policy is less valuable, just as every market investment is less valuable. Buyers need to put more money into their policies to see returns. The main draw of universal life insurance is the actual life insurance aspect, and that's not directly affected by interest rates-even though premiums are certainly affected.
Overall, it can be difficult for consumers to predict how universal life insurance rates will react to market changes, even though the factors that drive life insurance premiums might seem relatively obvious. Buyers should consider all types of life insurance before making a purchase. While rising costs have driven insurance premiums in the last several years, life insurance can still be a very valuable purchase. There are also ways to get around rising rates, for instance through comparison shopping. The Internet makes it easier than ever to compare and contrast several life insurance policies, and for many buyers, a few minutes of searching and comparing can lead to big decreases in life insurance rates down the line.
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Although life insurance is an important product, rising costs over the last several years have spurred consumers to consider all of their options when picking an insurance product. Universal life insurance can seem like a particularly advantageous purchase, as it's an investment. After a certain point, usually age 65, universal life insurance policy holders can take money back out of their policies. This is in contrast to term life insurance policies, in which premiums aren't usually returned. However, universal life insurance is also affected by the same economic factors as other types of life insurance, and premiums may rise. Knowing how the market affects rates can be helpful when choosing a plan.
One factor is the interest rates offered on large loans. Interest rates are particularly important for the life insurance industry because life insurance companies depend on banks to back up the coverage that they offer, literally by loaning money to pay for the significant costs of life insurance claims. In order to offer more policies, they need to be able to loan more money, regardless of the type of life insurance policy. Generally, the lower the interest rates, the lower the cost of the average insurance policy. Of course, this also means that when banks aren't loaning money, rates will inevitably rise. Some buyers may be denied coverage outright, although this is unlikely for universal life insurance.
Universal life insurance is different from other types of insurance such as whole life and term life because it has an investment aspect. Again, this means that interest rates are crucial in setting the value of policies. When the economy isn't growing, a universal life insurance policy is less valuable, just as every market investment is less valuable. Buyers need to put more money into their policies to see returns. The main draw of universal life insurance is the actual life insurance aspect, and that's not directly affected by interest rates-even though premiums are certainly affected.
Overall, it can be difficult for consumers to predict how universal life insurance rates will react to market changes, even though the factors that drive life insurance premiums might seem relatively obvious. Buyers should consider all types of life insurance before making a purchase. While rising costs have driven insurance premiums in the last several years, life insurance can still be a very valuable purchase. There are also ways to get around rising rates, for instance through comparison shopping. The Internet makes it easier than ever to compare and contrast several life insurance policies, and for many buyers, a few minutes of searching and comparing can lead to big decreases in life insurance rates down the line.
