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 charging 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 prices 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 insuring through Ant Insurance’s “National Coverage·Term Life Insurance” 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 year via annual payments. By March 1, the same coverage plan’s monthly premium had risen to 160 yuan, and the annual payment increased to 1,778 yuan. Overnight, the monthly premium increased by 10 yuan, and the annual payment by 114 yuan.

Previously, term life insurance has been a staple 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 Main Factors Driving the Price Increase

Term life insurance is a pure risk protection product. During the agreed coverage period, if the insured dies or becomes fully disabled, the insurance company pays 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-coverage-focused term life insurance not decrease but increase?

“Intuitively, 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 rate hike is a re-evaluation from the ‘long-term average longevity assumption’ back to the ‘real risk distribution.’”

The core logic behind the increase lies in the structural impact of the life table adjustment.

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 replace 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 consider the Fourth Life Table and their own experience data when setting product rates, and determine mortality rates prudently based on the product’s risk characteristics.

New data indicates that mortality improvements in middle-aged groups are less than previously assumed. Since term life insurance is a typical pure risk product, its price is almost entirely determined by mortality rates. 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 new life table was released, companies had already considered mortality improvements in their pricing, but perhaps too optimistically. The new, more accurate mortality data prompted insurers to optimize their mortality assumptions, which is the direct reason for the price adjustments.”

A relevant executive from China Life told 21st Century Business Herald that the Fourth Life Table shows some changes compared to the Third Life Table, reflecting the latest mortality experience in the industry. It will serve as an important reference for future product pricing, enabling more scientific pricing for products covering different risks such as life, old age, illness, death, and disability. China Life plans to gradually introduce products based on the new table, considering the product’s risk features.

Besides actuarial logic, changes in tax policies are another rigid cost pushing premiums higher.

On January 30, 2026, the Ministry of Finance and the State Taxation Administration issued the “Announcement on the Connection 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 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, which include return of principal and interest, are subject to VAT, but the VAT exemption does not apply to term life insurance that only covers death or total disability and does not return principal.

A research report from Founder Securities pointed out that, according to the latest VAT policy, since term life insurance only covers death or total disability and does not involve principal return at maturity, it is not eligible for VAT exemption and must pay a 6% VAT. This VAT will be passed through product pricing, contributing to the increase in premiums for term life insurance, estimated to rise by 5% to 10%.

Insurance Companies Shift from Low-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 premiums, high coverage, and broad underwriting acceptance, increasing market penetration but also leading to higher claims ratios, risk selection issues, and sustainability pressures. 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 noted that this rate adjustment marks a shift from price competition to quality-based 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 pricing. In this context, underwriting and health management capabilities are becoming core competitive advantages. Product design will increasingly align 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.

A research report from Dongwu Securities pointed out that term life insurance, with its high leverage and cost-effectiveness, can meet the high leverage needs of customers and provide mortality margin benefits for insurers, especially 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 increases triggered by lower guaranteed interest rates, this time the adjustment mainly affects the single product category 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 life insurance and annuities are mainly driven by interest rates, critical illness insurance is affected by both morbidity 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 highly sensitive to mortality assumptions. Current guaranteed interest rate estimates remain stable, and no systemic asset-side changes have occurred, keeping overall industry prices steady.

Regarding whether a broad insurance price hike will occur within the year, Zhu Junsheng believes that the probability of a widespread increase in the short term is low. The current rate adjustments are driven by structural changes due to life table updates, not by systemic shocks from interest rates or asset markets. With stable guaranteed interest rate estimates, future product pricing is more likely to involve gradual, segmented adjustments rather than a comprehensive increase.

In the long term, this price increase has sparked widespread discussion and reflects a growing awareness of the term life insurance market. Zhu Junsheng pointed out that, historically, due to savings preferences and other factors, term life insurance has been relatively marginal in China. However, as household debt cycles lengthen and middle-class risk awareness rises, 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 Based on Risk Gaps

For consumers, is there still value in purchasing term life insurance after the rate hikes?

Chen Hui emphasized that protection products differ from investment products. Their purchase logic is mainly based on filling personal or family risk gaps and is influenced by household structure and income.

Zhu Junsheng pointed out that even with higher rates, term life insurance remains one of the most cost-effective protection products 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 fundamentally unchanged. This means that at current rate levels, term life insurance still offers the best cost-performance ratio as a leverage tool.

For example, a 32-year-old man insuring 2 million yuan 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 noted that this “high coverage, low premium” high-leverage feature 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 consider their own risk needs carefully. Zhu Junsheng advised that in the “price increase era,” price should not be the sole decision factor. Consumers should also pay attention to underwriting rules, health disclosures, 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 genuinely covering the risk gap.

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 hikes are a result of actuarial re-pricing driven by life table updates, tax policy changes, and risk experience revisions, marking China’s term life insurance market’s gradual shift toward risk-based pricing and sustainable development.

(Edited by Wen Jing)