Interest rates are on the rise, which has affected millions of mortgage holders whose payments have dramatically increased since September 2022. On the contrary, those who have large savings pots are now able to benefit from the higher interest rates they are receiving from the bank.
A lesser-known impact of the rising interest rates is the effect it may have on insurance premiums. When the interest rate environment is high, life insurance companies may reduce premiums to drive their competitiveness in the market. In this blog post, we’ll explore the relationship between interest rates and life insurance premiums, and why premiums may be decreasing in the current high interest environment.
The Connection Between Interest Rates and Life Insurance Premiums:
Life insurance companies invest the premiums collected from policyholders in various assets, including bonds, stocks, and other investments. The returns generated from these investments are used to pay out claims and support the ongoing operations of the insurance company.
When interest rates are high, insurance companies can potentially generate higher returns on their investments, particularly in fixed-income assets like bonds. As a result, whilst not a guarantee, they can afford to offer lower premiums to policyholders, as their investment income can help cover the cost of paying out claims. In this way, a high interest rate environment creates an opportunity for consumers to secure more affordable life insurance policies.
Whilst it is not a guarantee the insurance companies will pass on the cost savings to the customers, this does create more competition in the insurance market which encourages customers to shop around for a better quote.
Why Now is the Perfect Time for a Price Comparison and Requote:
If you already have a life insurance policy, you might think there’s no need to consider a requote. However, given the current interest rate environment, you could potentially save a significant amount on your premiums. Here’s why now is an opportune time for a requote:
More Affordable Premiums: As mentioned earlier, life insurance premiums can be lower in a high interest rate environment. This means you could potentially secure a better deal on your policy by conducting a price comparison and requesting a requote via your financial adviser or insurance broker.
Improved Financial Security: With lower premiums, you can potentially increase your coverage, ensuring that your loved ones are better protected financially in the event of your passing.
Saving more: If you are able to save on your monthly life insurance premiums, this will leave valuable disposable income to cover other aspects of your expenditure requirements which can be a much needed relief in the current inflationary economy.
Competitive Market: As interest rates rise, insurance companies become more competitive in their offerings. This means you have a better chance of finding a policy that fits your budget and coverage requirements.
How to Get Started with a Requote:
To take advantage of the potential savings and benefits associated with the current interest rate environment, follow these steps:
Gather your current policy information, including coverage amount, premium, and any additional policy features.
Contact Fusion Financial to re-quote your current policies. We will carefully review the quotes, considering not only the premium but also the coverage options, policy features, and the financial strength of the insurance company.
You may have to undertake medical underwriting again.
During the process of the re-quote you should not cancel the existing policy, which should only be cancelled after the new policy is active and in force.
