Term life insurance may face a comprehensive price increase

Source: 21st Century Business Herald Author: Lin Hanyi, Xu Ruoxuan

Right after the Spring Festival holiday, term life insurance products experienced a wave of price increases.

Southern Finance reporters noted that starting March 1, many popular online term life insurance products have completed price adjustments, with new products generally seeing higher premiums. Among them, Sunshine Life’s “National Coverage·Term Life Insurance” increased by about 7.2%, and Tongfang Global Life’s “Zhen Ai 2026 Term Life Insurance” saw a price hike of 7% to 8%. This is the first widespread industry-wide increase in term life insurance in recent years, attracting broad market attention.

Consumers have already felt the impact of the price hikes. Our reporters tested and found that a 23-year-old woman purchasing the “National Coverage·Term Life Insurance” on Ant Insurance platform, with a coverage of 2 million yuan, protection until age 60, and a 20-year payment period, paid 150 yuan per month on February 28 via monthly payments, and 1,664 yuan per installment annually; by March 1, the same coverage plan’s monthly premium had risen to 160 yuan, and the annual installment to 1,778 yuan. Overnight, the monthly payment increased by 10 yuan, and the annual payment by 114 yuan.

Previously, term life insurance has been a standard choice for family financial support due to its low rates and high coverage. This price adjustment marks a gradual shift in China’s term life insurance market toward risk-based pricing and long-term sustainability, transforming from “volume-driven products” to genuine tools for long-term risk management.

Two Major Factors Driving the Price Increase

Term life insurance is a pure protection product. During the agreed coverage period, if the insured dies or becomes totally disabled, the insurance company will pay out the agreed amount. Many consumers are confused by this round of price hikes. The new life table introduced in 2026 shows increased life expectancy and decreased overall mortality rates. Why, then, does the price of death-benefit-focused term life insurance not decrease but increase?

“From a straightforward perspective, longer life expectancy should reduce the cost of death benefits, but this does not conflict with the rate increases,” said Zhu Junsheng, a postdoctoral researcher in applied economics at Peking University, in an interview. “The core reason for the rate hike is a re-evaluation from the ‘long-term average longevity assumption’ back to the ‘realistic risk distribution’.”

The main logic behind the increase is the structural impact caused by the adjustment of the life table.

In October 2025, the China Banking and Insurance Regulatory Commission issued the “China Experience Life Table (2025)” (hereafter “Fourth Life Table”), which will be implemented from January 1, 2026, and will simultaneously abolish the relevant notices of the previous third life table.

The Fourth Life Table does not simply reflect “longer overall lifespan,” but recalibrates for different age groups and risk segments. The document states that insurance companies should determine product rates based on the Fourth Life Table and their own experience data, considering the product’s risk characteristics and following prudent principles to establish mortality rates.

New data indicates that mortality improvements in middle and young age groups are less than previously assumed in pricing. Since term life insurance is a typical pure risk product, its price is almost entirely determined by mortality parameters. When actuarial assumptions are revised, risk premiums must be adjusted accordingly.

Chen Hui, director of the China Actuarial Science Laboratory at Central University of Finance and Economics, added: “Before the release of the new life table, companies had already considered mortality improvements in their pricing, but may have been overly optimistic. The new mortality data is more accurate, prompting insurers to optimize the mortality assumptions used in pricing, which is the direct reason for the rate adjustments.”

A relevant person from China Life told 21st Century Business Herald that the mortality rates in the Fourth Life Table have changed compared to the third, reflecting the latest industry mortality experience, and will serve as an important reference for future product pricing, especially for products covering different risks such as life, old age, illness, death, and disability. China Life will incorporate the Fourth Life Table and experience data into its product rate setting, gradually launching products based on the new table design.

In addition to actuarial logic adjustments, changes in tax policies are another rigid cost driving premiums higher.

On January 30, 2026, the Ministry of Finance and the State Taxation Administration issued the “Announcement on the Transition of VAT Preferential Policies after the Implementation of the VAT Law,” which states that from January 1, 2026, to December 31, 2027, premiums from life insurance products with a term of over one year sold by insurance companies will be exempt from VAT.

The new regulation clarifies that life insurance, pension annuities, and other annuities with a term of one year or more, including health insurance with a period of one year or more, are subject to VAT.

Fangzheng Securities research reports indicate that, according to the latest VAT preferential policies in 2026, term life insurance, which only covers death or total disability and does not return principal at maturity, is not included in the VAT exemption scope and must pay a 6% VAT rate. This VAT will be passed through product pricing, pushing up premiums by 5% to 10%.

Insurance Companies Shift from Price Competition to Quality Competition

This price increase also reflects a deeper evolution in the competitive landscape of the term life insurance market.

In recent years, online term life insurance has expanded rapidly by leveraging low rates, high coverage, and broad underwriting acceptance, increasing market penetration but also leading to higher claims ratios, risk selection issues, and sustainability pressures for some products. Some insurers have adopted overly aggressive pricing to gain market share, resulting in losses. The rate hikes indicate that insurers are seeking a balance between accurate pricing and operational rationality.

Zhu Junsheng pointed out that this rate adjustment marks a shift from price competition to quality competition in the term life insurance market. After the rate increase, the industry’s competitive logic is moving from simple price comparison to refined risk-based pricing. In this context, underwriting and health management capabilities are becoming core competitive advantages. Product design will also become more aligned with household risk scenarios rather than just initial low-price customer acquisition. Term life insurance is transforming from a “volume-driven product” into a genuine tool for long-term risk management.

Dongwu Securities’ research reports that, given the high leverage and cost-effectiveness of term life insurance, it can meet the high leverage needs of customers and provide mortality margin benefits for insurers under current economic pressures.

Chen Hui added: “Term life insurance is a relatively simple protection product with limited room for optimization. Therefore, this adjustment is mainly about insurers pricing more accurately and operating more rationally.”

Unlike previous industry-wide price hikes triggered by lower guaranteed interest rates, this time the increase mainly affects the single product of term life insurance, with other types remaining stable. The fundamental difference lies in the pricing logic of different insurance types.

Zhu Junsheng explained that savings and annuity products are mainly driven by interest rates, critical illness insurance is affected by both morbidity rates and interest rates, while the core pricing basis for term life insurance is mortality. The recent changes are primarily due to updates in the life table, which most directly impact pure protection products sensitive to mortality assumptions. Current guaranteed interest rate estimates remain stable, and there are no systemic changes on the asset side, so overall industry prices remain steady.

Regarding whether a broad industry-wide price increase will occur within the year, Zhu Junsheng believes the probability is low in the short term. The current adjustment is driven by life table updates, representing structural revisions rather than systemic shocks from interest rates or asset markets. With stable guaranteed interest rate estimates, future product pricing is more likely to see gradual, segmented adjustments rather than a comprehensive increase.

In the long term, this price hike has sparked widespread discussion and reflects a rising awareness of the term life insurance market. Zhu Junsheng noted that, historically, due to savings preferences and other factors, term life insurance has been relatively marginal in China. However, with longer household debt cycles and rising risk awareness among the new middle class, its market foundation is changing. In the future, term life insurance is more likely to serve as a basic risk management layer within family financial planning, similar to how basic health insurance functions within the healthcare system, becoming a bottom-line tool for financial security.

Choosing Insurance Should Focus on Risk Gaps

For consumers, is a term life insurance policy still valuable after the rate hikes?

Chen Hui emphasized that protection products differ from investment products. Their primary purpose is to fill personal or family risk gaps, influenced by family structure, income, and other factors.

Zhu Junsheng pointed out that even with higher rates, term life insurance remains one of the most cost-effective protection tools in the insurance system. Since it does not serve as a savings vehicle or rely on investment returns, and only covers death risk, its risk leverage remains unchanged. This means that at current rate levels, term life insurance continues to be an optimal leverage tool with high cost performance.

For example, a 32-year-old man purchasing 2 million yuan coverage until age 60 with a 20-year payment period, after the price increase, pays about 1,682.4 yuan annually, with a coverage leverage ratio still exceeding 59 times. Dongwu Securities research team pointed out that this “high coverage, low premium” high leverage characteristic makes it especially suitable for low-income groups with strong risk protection needs in China.

Therefore, for those at the peak of family responsibilities—such as primary earners, mortgage holders, families with minor children, or those with limited assets but growing income—term life insurance remains a high-priority option. These groups typically face “heavy responsibilities and high debts,” and in case of risk, their family’s financial stability could collapse.

Conversely, individuals who are financially independent, have lighter family responsibilities, or already have sufficient coverage should carefully assess their own risk needs. Zhu Junsheng advised that in the “price increase era,” price should not be the sole decision factor. Consumers should also consider underwriting rules, health disclosure requirements, exclusions, waiting periods, occupational restrictions, and whether the coverage period matches their family’s risk cycle. The long-term claims stability of the insurer should also be considered. Since term life insurance covers a specific risk period rather than lifelong wealth accumulation, the core of its allocation should focus on truly covering the risk gaps.

In the medium to long term, Zhu Junsheng believes that the penetration rate of term life insurance still has room to grow, but the growth path will be more stable and rational. Overall, the recent rate increases are a result of actuarial re-pricing driven by life table updates, tax policy changes, and experience adjustments, marking China’s term life insurance market’s gradual shift toward risk-based pricing and sustainable development.

(Edited by: Wen Jing)