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                  "Buyer's Market for Term Life Insurance"

     For buyers of term life insurance (and low-cost "term universal
     life") now is an opportunity that they will not ever see again,
     according to John Venezia, an independent insurance general
     agent, broker, and financial consultant in Champaign. His firm,
     Venezia Insurance Brokerage, is located on Fox Drive in
     Champaign.

     For several years now, it has been a "buyer's market" for
     consumers purchasing term insurance policies. Intense competition
     among insurance companies has not only driven rates lower, but
     has also lengthened the "guarantee periods" on many term life
     insurance products.

     Most term policies have low, current rates which the insurer
     charges, and which are expected to be adequate throughout the
     life of the policy. Insurance companies do, however, have higher
     "guaranteed" premiums which allow them to raise rates at some
     future point, if their mortality (death claims) experience and
     expense factors make it necessary. In the intense competitive
     environment of recent years, insurers have been guaranteeing
     their current rates for as long as ten, fifteen or even twenty
     years. Consumers have come to accept and even expect these
     attractive guarantees as part of the contract. (For example, a
     healthy non-smoking male age 45 who meets certain health
     requirements could buy $500,000 of life insurance for less than
     $800 annually. This with a ten-year level outlay and with rates
     guaranteed not to increase in the first ten years).

     The "buyers market" will soon be coming to a close. The state
     insurance commissioners and their national association (known as
     the NAIC) have mobilized to change this picture. Essentially,
     Venezia says, "the insurance commissioners are concerned that the
     very low prices and the long-term guarantees could cause some
     life insurance companies to lose money and have an adverse effect
     on their reserves. So in response to the potential problem, the
     NAIC has developed new regulations referred to in the industry as
     XXX and EEE (or "triple X" and "triple E"), which will have the
     effect of shortening the guarantee periods. The new regulations
     will be adopted by the states after January of 1996, and will be
     "prospective" rather than "retrospective". This means that the
     policies that are sold until it is formally implemented would be
     unaffected by the new regulations."

     What does this mean for life insurance companies, their agents,
     and insurance buyers? It appears that until these new regulations
     are implemented that there should be a "fire sale". That is, a
     time for the consumers to buy low-cost, competitive term and
     "Term UL" products with premiums and rate guarantees that will
     not ever be available again.

     Venezia notes that life insurance actuaries across the country
     have studied the proposed regulations, and have developed new
     products, or revised old ones, in response to the proposed
     regulations. Venezia also stated that "the longer guarantee
     periods which are available on certain products today will likely
     be shortened considerably. Alternatively, the long guarantees
     could remain, but the rates and premiums that the consumer pays
     would then increase. Basically, the insurance companies would
     have a choice of either eliminating the guarantee periods that
     are currently available and keeping the rates about the same as
     they are now, or keeping the existing guarantee periods, and then
     increasing the premium rates. It is felt that the proposed
     regulations will have an impact on the pricing and structure of
     other permanent, or whole life, products as well."

     Venezia feels that the NAIC's concerns regarding reserves really
     only applies to an extremely small percentage of the insurance
     companies marketing these products. "Unfortunately they are all
     going to have to pay the price because of some possible problems
     with a very few of the insurance companies." Venezia also states
     emphatically that "the problems that a few insurance companies
     have had who went under, were a result of bad investments,
     particularly a high percentage of net worth in "junk bonds" and
     bad real estate. No company has ever gone under because of
     offering competitively priced term products with solid
     guarantees." He thus feels that the NAIC's concern is unwarranted
     and their proposals and actions misdirected.

     Will the difference in rates and guarantees be enough to motivate
     consumers to buy more life insurance now instead of waiting until
     later? Venezia definitely thinks so. "In recent years, we have
     found that insurance buyers were very much aware of both price
     and contractual guarantees. Also, knowledgeable agents should be
     bringing these issues to the attention of their existing
     clients."

     You probably do not spend much time thinking about buying life
     insurance. However, now just may be the time in which to give it
     some extra thought, especially if you enjoy low premium rates and
     strong, long term, guarantees.

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