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 “Universal Protection · Term Life Insurance” increased by about 7.2%, and Tongfang Global Life’s “Zhen Ai 2026 Term Life Insurance” raised prices by 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 insuring through Ant Insurance’s “Universal Protection · 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 increased to 160 yuan, and the annual premium to 1,778 yuan. Overnight, the monthly payment increased by 10 yuan, and the annual payment by 114 yuan.

Previously, term life insurance, with its low rates and high coverage, became a standard for family financial support. This price adjustment marks a gradual shift in China’s term life insurance market toward risk-based pricing and long-term sustainability, transforming from a “traffic-driven product” into a true tool for long-term risk management.

Two Main Factors Driving the Price Increase

Term life insurance is a pure 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-benefit-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 ‘long-term average longevity assumptions’ back to ‘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 released 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 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 set mortality rates.

New data indicates that mortality improvements in middle-aged groups are lower than previous assumptions. 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 new life table was released, companies had already considered mortality improvements in their pricing, but perhaps too optimistically. 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 Fourth Life Table shows some changes compared to the third, reflecting the latest industry mortality experience, and will serve as an important reference for future insurance product pricing. It will facilitate more scientific pricing for products covering 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.

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

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 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 premiums for such policies are not exempted. Since term life insurance only covers death or total disability and does not involve principal return at maturity, it is subject to a 6% VAT rate, which will be passed through product pricing and lead to higher premiums—estimated to increase 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 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 “traffic-driven product” into a genuine tool for long-term risk management.

Dongwu Securities’ research report noted 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 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 downward adjustments in the guaranteed interest rate, this time the price change 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 highly sensitive to mortality assumptions. Current reserve 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 structural changes due to life table updates, not by systemic shocks from interest rates or asset markets. With reserve interest rate estimates remaining relatively stable, future product pricing is more likely to involve gradual, segmented adjustments rather than a comprehensive increase.

In the long term, this price hike has sparked widespread discussion and reflects a growing awareness of the term life insurance market. Zhu Junsheng pointed out that for a long time, due to savings preferences and other factors, term life insurance has been somewhat marginal in China. However, with the extension of 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 Based on Risk Gaps

For consumers, does the price increase still make term life insurance a valuable allocation?

Chen Hui emphasized that protection products differ from investment products. They are primarily purchased to fill personal or family risk gaps, influenced by household structure and income.

Zhu Junsheng pointed out that even with higher premiums, 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 property remains unchanged. This means that at current premium 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 rate 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 breadwinners, homeowners with mortgages or long-term debts, families with minor children, or those with limited assets but growing income—term life insurance remains a high-priority allocation.

These groups typically share the characteristics of “heavy responsibilities and high debts,” and in the event of risk, their family finances could collapse.

Conversely, those who are financially independent, have lighter family responsibilities, or already have sufficient coverage should carefully consider their own risk needs. Zhu Junsheng pointed out that in the “price hike era,” price should not be the sole factor in decision-making. Consumers should also pay attention to 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 insurance companies should also be considered. Since term life insurance covers a specific risk period rather than lifelong wealth accumulation, the focus should be 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 rate hikes around 2026 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)