It seems like good logic: a life insurance policy purchased in the past, when clients were younger and presumably better health, should be less expensive than a policy purchased today.  But that is rarely the case.  Here's why. 

 

As mortality rates change, the cost of life insurance changes.  Underwriters are continually adjusting how much it costs for their insurance companies to underwrite the cost of insurance.  Medical technology and life style changes are some factors which effect how long people live and mortality tables are constantly adjusted to reflect those factors.  For example, from 1979-1998,  deaths attributed to diabetes increased by 39%.  During the same time, deaths from stroke decreased by 40% and cancer deaths fell by 6%.  This type of information is used to project life expectancy.  In 1990, a 65 year old could expect to live 17.2 more years; by 2000, a 75 year old could expect to live 11.4 more.  Such fluctuations change the cost of insuring lives. 

 

Additionally, new policy features, loans, the performance of side accounts, and other factors can change the cost of a life insurance policy.  These changes are often in a client's favor, even though they are older.  Many policies also have a value attributed to them and that value can usually be exchanged into a new policy, creating a policy with a portion of the premium already paid. 

 

If you have a client with a policy which hasn't been reviewed for several years, please give us a call to discuss some options.  The policy you got a few years ago may no longer be the best option for the client. 

After working with The TOLI Group, the Smith's decided to purchase 3 new policies using the strategy described above.  This  reduced their annual premiums by $27,000 while increasing their overall death benefit by more than three million dollars. 

 

This hypothetical example is for illustrative purposes only.  It does not reference any specific client experience.