Originally published on hubpages
If recent revelations by OneAmerica CEO J Scott Davidson have any bearing, the answer is YES! In an article dated January 2022, Davidson warned of a stunning 40% increase in US death rates. Even more surprising they are not necessarily related to Covid!
What the Sudden Rise in US Death Rates Means to You
If you already have a good life insurance policy in place, probably not much. That’s the good news. However you should keep a close eye on your insurance carrier. You want to be sure they are still financially stable. A 40% increase in death rates means a potential huge, and unexpected number of claims for death benefits. Insurance companies don’t like surprises, especially when it comes to risks they’ve taken. Most should be able to weather this storm. Policyholders with mutual insurance companies may see smaller than usual dividends this year, possibly longer. This could also be an indicator they are struggling financially.
For those looking to buy life insurance, rates could well go up. In fact, rates may already be rising. They have to if this trend continues because life insurance rates are based on life expectancies. Insurance companies, by law, are expected to stay solvent. This is also desirable for policyholders who expect their beneficiaries to be paid when the time comes. Rates for permanent insurance are typically fixed. Universal life policies can and do adjust for the “cost of insurance” so UL policyholders need to keep even closer tabs on their polices.
Should I put off buying life insurance?
NO! As always the best time to protect your family is NOW!
Why You Should Secure Your Life Insurance NOW…
It is always a good idea to buy life insurance while you are young. For parents, I recommend insuring each child’s life, preferably with a stand-alone policy. Why buy so young?
All life insurance premiums are based on the life-expectancy of the insured. It only follows that the younger someone is when they are insured the less it will cost. Also, health issues tend to emerge as we age. Given that, doesn’t make sense to secure a life insurance policy before any health issues arise?
This same holds true for adults, except, the older we get the more likely we are to experience some sort of health problem. While many are minor, some may limit where one can obtain insurance or even prevent someone from getting all but the most expensive life insurance. In addition, there is another, more practical reason to secure your policy now.
A solid basic life insurance policy from a strong mutual insurance company is an asset that builds cash value over time. The more time you own a policy, the more cash value it can build. Plus, mutual companies pay dividends on certain policies. By electing for your dividends to be added to your policy as “paid up additions” (micro-policies, if you will), your cash value builds even faster as these paid up additions also collect dividends!
Warning: One traditionally top mutual insurance company, Ohio National, is not expected to continue paying high dividends on insurance policies as they recently became an independently managed subsidiary of Constellation, a Canadian holding company.
What To Look For In An Insurance Company
When you are ready to acquire a life insurance policy, you should look for a mutual insurance company that consistently pays good dividends. As for a policy, keep it simple. Choose a basic policy that earns dividends with a fixed premium. This means you will pay the same premium every period (usually monthly). The dividends will vary depending on how well the insurance company prospers. Generally speaking, companies with a good reputation for paying high dividends will keep doing so.
You’ll want to look for mutual insurance companies that pay the best dividends. To do so, search the internet for “highest dividend life insurance”. You’ll find several websites offering lists. One note here for 2022: Ohio National will top most, if not all lists, however they recently became an independently managed subsidiary of Constellation, a Canadian holding company. This means their policies will no longer pay dividends as in the past so I suggest you pass them by.
In addition, I recommend you stay away from universal life plans. These are also sometimes called flex plans or something similar. The tell is whether the premium is a fixed amount or you are allowed to reduce or increase your payment. There are two reasons to avoid these plans.
First, universal life plans will increase the “cost of insurance” at some point. This could mean you have to increase your monthly premium to keep up the policy. Even if you don’t have to do this, the increased cost of insurance will mean less money goes towards building cash value in your policy.
The second reason is varying your premium means you are varying the amount of money going into your cash value. Yes, if you are always adding more this can be a good thing, but paying less premium means you are building less cash value. The end result is you are skewing the numbers so your policy will not build the cash value you expected when you first bought the policy.
If you have extra money, you might be better off putting it to work for your elsewhere. Track down a good financial advisor to help you make sound decisions.
The Family Approach to Life Insurance
When insurance rates go up, the will likely go up across the board. This is one more reason to take a “family approach” to buying insurance. This means you should secure a policy for each member of your family. Not only will each get the best possible rate right now, but insuring family members now with a permanent life insurance policy means they will always have insurance as long as the premium is paid.
Concerning children’s policies – these policies are not known to build significant cash values. What is most important here is guaranteed insurability. Most stand-alone insurance polices allow a child to increase their coverage upon reaching adulthood, often to age 25, even if they become otherwise uninsurable. For those who are in good health and otherwise qualify for the best rates from top companies, they should compare other options with the policy in hand with an eye towards securing a second policy with better prospects for cash value growth.
Dividends Never Guaranteed!
While some insurance companies may guarantee some sort of minimum growth on the cash value of a policy, no company guarantees dividends will be paid. That said, it is often a point of pride, as well as a selling point, for mutual insurers to consistently pay high dividends.
Rather than wring one’s hands over this reality, a more sensible approach is to do the best you can with the information available as nobody can predict the future. Also keep in mind, the number one goal in securing life insurance is to provide a death benefit to protect a family’s assets from an unexpected financial burden.
Putting it all together, the recent sudden jump in the US death rates has insurance companies on edge. Should this be a trend rather than a mere hiccup, expect them to take action by raising insurance rates. They have to in order to remain solvent.
While now is always the best time for most people to buy life insurance, this adds one more critical reason to buy now, especially if affordability is an issue. Other reasons such as one’s age and heath status are also compelling reasons to secure coverage now rather than later. The final consideration, giving a policy more time to build cash value is also worth factoring into the decision.
Cash value will grow at a faster rate when a policy issued by a mutual insurance company paying consistently high dividends is chosen. While some insurers offer and sometimes promote universal life policies, the issue of an increasing “cost of insurance” can and should be a deciding factor. A better option is a standard policy with a fixed premium that never changes.
About dividends: while they are never guaranteed, top mutuals tend to consistently pay them as a matter of pride. Children’s policies are not known for building cash value, thus the best approach is for them to consider a second policy once they reach adulthood. While they can continue to enjoy basic protection at a rock-bottom premium with their initial policy, the second policy can be added to secure increased coverage with better cash value accumulation.
The bottom line: chances are there will never be a better time to protect your family.
Learn more about protecting your and your family in my new book “Life Insurance “Dirty Little Secrets” for Consumers Revealed!”. Even if you already have life insurance, there are things you should know. For those still unprotected, this slim volume answers those questions that keep most people from securing a solid, affordable policy. You’ll learn what to look for in an insurance company and a good policy to provide financial security for you and your family. Rather than being “sold” a policy, “Life Insurance “Dirty Little Secrets” for Consumers Revealed!” empowers you to seek out and secure the coverage that best works for you.