Increasing life insurance costs are a perennial problem for all policyholders. Discover the drivers behind this, and what you can do to adapt.
Key Takeaways:
- Life insurance costs are set to rise for the fourth consecutive year.
- As people live longer, insurers may need to adjust their pricing models to account for extended life expectancies.
- Changes in the insurance industry can also influence premium rates.
According to 2024 figures published by LIMRA, the number of life insurance policyholders has been steadily decreasing over the last 15 years.
Today, only 51% of Americans have some kind of life insurance policy in place, which leaves almost half the nation uncovered.
The most common barrier to entry? Pricing concerns.
Nonetheless, this is understandable. The unfortunate truth is that life insurance policyholders and those looking to start coverage will face higher premiums in 2025 due to several factors.
Why? Let’s answer that question and share some strategies you can use to mitigate the impact of higher premiums.
Factor #1: Rising Healthcare Costs
A December 2024 report revealed that health insurance is now in its fourth year of increases, with 42 states paying more for coverage (an average of $7,452 per year). How does this tie in with rising life insurance premiums?
Generally speaking, life insurance doesn’t cover healthcare costs as a feature. What it can do is pay out if someone dies, allowing their beneficiaries to use those funds toward outstanding medical bills. This is why some people choose health insurance alongside life coverage to keep their life policy untouched.
However, the rising costs of care are making health insurance more expensive, creating a knock-on effect. Some policyholders may be forced to reduce their health coverage (thereby risking their health with less access to treatment) or even join the 26 million Americans without any health insurance coverage at all.
Both scenarios—having reduced or no access to healthcare at all—increase liability. This sadly makes passing away a more likely outcome, and increases the likelihood of an insurer having to pay out.
Either case makes insurers adjust the cost of their life insurance premiums accordingly.
Now, let’s look at another factor contributing to higher healthcare costs, and how it can mean paying more for life insurance premiums.
Factor #2: Increased Longevity
Global life expectancy is projected to increase to 78.1 years over the next quarter century. This is an interesting metric from an American insurance standpoint, since domestic life expectancy already exceeds that figure (currently sitting at 78.4 years).
For those Americans with access to healthcare—or simply great genes—a growing lifespan is good news. On the downside, it also means more time for accidents and ill health to occur.
Advancing age affects life insurance premiums both individually and collectively because it increases the chances of these risks becoming reality. This makes budgeting for long-term healthcare a strategic move, and a potential way to take pressure off your life insurance policy.
Factor #3: Industry Changes
Some other components contributing to increasing life insurance premiums (or keeping them consistently high for the foreseeable future) include the following.
Stricter Underwriting
As insurers are forced to tighten their belts and with fewer consumers buying, providers are increasingly more inclined toward healthier life insurance prospects. Technology also plays a more prominent role in deciding who qualifies for life coverage.
A sharper focus on behavioral analytics—data drawn from the wearable devices of policyholders—is yielding greater amounts of information on individuals’ lifestyles and health status. This gives insurers more insight, and more power, when it comes to setting higher life insurance rates for some people.
Reduced Competition
The latest statistics show a decades-long freefall in the number of life insurers available to American consumers. This reduced choice makes it easier for policy providers to raise their life insurance costs.
Since many people may be forced to forgo coverage, more insurers could struggle or collapse in the coming years, further shrinking the market.
Elevated Interest Rate Markets
This will ultimately pay off for insurance company investments and, eventually, the consumer. However, the growth experienced by an insurer’s investments portfolio thanks to higher interest rates can take a long time to materialize.
The fact that these gains aren’t quickly available to insurers—and therefore not to policyholders in the form of lower rates—could mean that a decrease in premiums might be years away.
Thankfully, policyholders aren’t powerless in the face of these big economic forces.
Here are some strategies you can use to mitigate the effects of rising life insurance premiums.
Potential Improvements to Your Life Insurance Premiums
Insurance companies are in large part risk managers. Policyholders should think of themselves in the same way to (hopefully) pay less for their coverage:
- Consider term life insurance, where premiums will remain steady for the duration of the policy.
- Shop around to see if another insurer can offer better rates than your current provider.
- Make positive lifestyle changes around exercise, diet, and recreational habits (and always with the approval of your medical advisor).
- Consider reducing the amount of coverage in your current policy, if only temporarily.
- Bundle your life insurance premiums with home and auto insurance from the same provider.
Don’t let rising life insurance costs get you down. The NICRIS team is here to assist you with any questions you might have about this kind of coverage and amore.
Find Affordable Life Insurance with Help From NICRIS
Taking a proactive approach is essential to improving your chances of securing lower life insurance premiums. Making informed decisions now can lead to significant savings in the long run.
With years of experience, we’re here to guide you through the process and help you find the best coverage options that fit your current circumstances.
You can schedule an appointment to review your current coverage or discuss a new one, or just drop us a line via our contact form. We’d love to hear from you!