How do interest rates affect my life insurance premium?
What Harry says: In life insurance, money has to be held by the company to cover the period between the receipt of the premium and the death of the person insured (if it occurs). This "float" must be invested by the company. If the interest rate on bonds goes down, less money is earned, and the shortage has to be made up by higher premiums. Sure, life expectancy increases will work to reduce premiums, but recently they have not been enough to make up the income shortage. Incidentally, get at least two quotes, because rates can vary by almost 50 percent among good companies. And my standard of company safety: Make sure the company you choose writes the policy you choose on New York residents.
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