MIKE LUCIA   StaffLIFE INSURANCE AGENT Clyde Nachand of Centurion Insurance in Dublin offers advice on life andhealth insurance.  The replacement of any
MIKE LUCIA Staff LIFE INSURANCE AGENT Clyde Nachand of Centurion Insurance in Dublin offers advice on life and health insurance. The replacement of any policy should be undertaken only after a comparison of the old policy with the new contract is made. Premium cost alone is not enough to make a proper decision when dealing with the replacement of insurance, Nachand advises.
IF YOU HAVE term life insurance, you might want to think about shopping around for a new policy — since rates are declining rapidly.

Rates are dropping for this type of life insurance largely because people are living longer, observers say. In addition, the Internet has brought more competition and efficiencies to the industry over the last decade.

Term life insurance is exactly what its name implies — it's good for a set amount of time. You have to die before the policy expires in order to collect the death benefit.

The other type, known as permanent life insurance, has premiums that tend to be several times higher than term. That's because a permanent policy will pay off a death benefit regardless of when the insured dies.

Also, if a permanent policy is canceled after being held for several years, the policyholder can get some of the money paid in premiums returned in the form of a cash value payment. That doesn't happen when a term policy is canceled.

Another major difference is that permanent insurance rates tend to be steady for the life of the policy. With annual term insurance, rates climb as the insured gets older. However, level term policies let consumers lock in rates in five-year stretches for long-term policies that typically range from 10 to 30 years.

So who needs life insurance? Generally, life insurance is meant to provide a financial cushion for surviving family members in the event of a primary breadwinner's unexpected death.

While rates for term life insurance have dropped as much as 60 percent compared with the mid-1990s, rates for permanent life insurance such as universal life and whole life have not changed much at all, according to Byron Udell, chief executive of AccuQuote.com, an online insurance broker (see chart). A 40-year-old, non-smoking male in good health could get a 20-year level term life insurance policy with $500,000 death benefit for as low as $30 a month.

"(Term life insurance rates) really precipitously came down in the mid-'90s. It was like going down on the roller coaster at Great America. It's good for consumers," Udell said. In addition to people living longer, the insurance industry has become more efficient and competitive as it embraced the Internet, which has helped bring rates down, he added.

Life insurance rates will fall about 4 percent in 2007, with most of the decline happening on the term insurance side of the business, according to Steven Weisbart, spokesman for the Insurance Information Institute.

"Life insurance rates are dropping because death rates for the 25-44 age group — the primary age range for purchasing life insurance — have decreased significantly over the past 10 years," he said.

Indeed, rates have been dropping at a much faster clip for term insurance than permanent life insurance over the last decade, according to the institute.

That's because premiums for permanent insurance are more closely tied to an insurance company's investment portfolio — while term policies are more impacted by mortality rates, or how long people live, Weisbart explained. Insurers typically invest part of the premiums collected for permanent life insurance in the bond market, he said. In recent years, interest rates in the bond market have been on the low side.

"If you have a good permanent plan, there is very little compelling reason to trade it for another permanent plan," Udell said. Signing up for a new permanent policy will also require payment of new expenses that have already been paid off in the old policy, he said.

Term insurance is a different story.

"To replace a term insurance policy is a very simple process. You take what you pay and shop the market and see if you can get a lower rate," Udell said.

Still, experts point out that finding the right life insurance policy is more than just looking for the lowest premium. Consumers should also consider factors such as the insurer's reputation and its customer service, they say.

"This is a very long-term financial commitment. You certainly want to do business with a company you could feel comfortable with," said Marilyn Zack of Zack Insurance Services in San Carlos. "Rates are only the tip of the iceberg."

Zack also pointed out that a person's age is going to affect the premiums when shopping for a new policy.

"It could be a good idea (to switch policies) if the age difference is not too dramatic, if it's three, four, or five years after you bought the initial policy," she said.

Clyde Nachand is a licensed life and health insurance agent with Centurion Insurance, a Dublin-based insurance broker.

"The replacement of any policy should be undertaken only after a comparison of the old policy with the new contract is made," he said. "Premium cost alone is not enough to make a proper decision when dealing with the replacement of insurance."

Whether you opt for a term or permanent policy, Nachand said there is a rule-of-thumb recommendation to get a life insurance policy with a death benefit 10 times that of a household's gross annual income.

Many people do opt for term policies because they tend to be more affordable in the early years for a growing family, Nachand said.

"A lot of young couples buy term simply because they are starting a family and paying the mortgage," he said.

Term insurance should be chosen only in cases where the need for insurance will no longer be there after the policy expires, Zack said. Examples include having a 30-year-term policy to help ensure that a 30-year mortgage is paid off in the event of the death of the primary breadwinner.

But while premiums typically cost more for permanent insurance, it could be a better life insurance solution in some cases, experts say.

"Term is generally a short-term solution," she said. "Most families have very long-term needs."

Carriers often allow consumers to convert from a term policy to a permanent policy.

To that end, consumers might want to think of getting a quote from their current provider of term insurance, according to Nachand.

"You may end up buying a term policy from a carrier whose premium is a little higher because you anticipate in a few years converting that policy to a permanent contract. That permanent contract may be less than the other company that had the cheaper term," he said.

To get a list of life insurance agents in your area, call the Western Insurance Agents Association at (800) 553-4221. To get tips on buying life insurance, visit the state Department of Insurance's Web site at http://www.insurance.ca.gov. You can check on the licensing status of an agent by calling the department's consumer hot line at (800) 927-4357.