How Rising Interest Rates Could Lower Your Life Insurance Premium

Empire Life has come out with a unique Hybrid Life Insurance policy that will allow Canadians to benefit when interest rates finally rise from their historical lows.

The plan is called Hybrid Solution 100, and it offers the following benefits:

  • Level coverage, paid-up at age 100
  • An easy process regarding how premiums change
  • Premiums tied to a set of interest rate ranges
  • A maximum premium limit
  • Minimum value limits
  • Values starting after the fourth year

How your premiums are determined

Each year, Empire Life will determine an annual interest rate by calculating the average for the last six months of the previous calendar year through a monthly benchmark interest rate. This annual interest rate that’s calculated through these monthly benchmarks determines the interest rate range used to establish your premium for the year.

Details of the benchmark interest rate and how the annual interest rate is calculated can be found in the paperwork that comes with your Hybrid Solution 100 policy. Using a six-month average interest rate together with an interest rate range helps to smooth out variations in the benchmark interest rate. This allows for annual changes to your premium and employing the average interest rate for the last six months each year to calculate pricing and keeps your policy price current at all times. (Source:

For more details on Term 100 Life Insurance, please contact us at 1-866-899-4849 or visit our Whole Life Insurance Quote Page.

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  • Matt
    September 8, 2013 at 3:47 am

    Can Whole Life policies be combibed with Universal Life what is the difference

    • LSM Insurance
      September 8, 2013 at 7:40 am

      Thanks for the note. Generally Whole Life policies and Universal Life policies must be separate plans. Generally Whole Life policies have more guarantees than Universal Life Insurance and less flexibility. A cash value feature is built into the policy. Universal Life insurance offers more flexibility but less guarantees. The cash value is unbundled from the insurance.

  • Dave
    June 25, 2013 at 9:10 am

    I understand the concept of this product with Empire Life but how do you explain it to a client and expect them to remember it every year when their premium keeps changing?

    • LSM Insurance
      June 25, 2013 at 9:13 am

      Thanks Dave. I think it’s important to explain it to the client in a way they can understand at the onset. A review even by phone on a yearly basis is also a good things. Other needs may also be uncovered as people have life changes.

  • Philip
    June 20, 2013 at 9:49 pm

    The persistent low interest rates continue putting stress on our insurance business in different ways:
    • Low interest rates have an adverse effect on investment results and increase the reinvestment risk of assets. Particularly, Life insurance activities are impacted, due to the typical long-run obligations to policyholders that become more expensive in today’s terms when market rates are low.
    This problem is even more pronounced for products were guaranteed rates of return have been offered to policyholders, due to “yield spread compression”: as matured assets are (re)invested, the achievable spread between returns on assets and guaranteed rates shrinks. As such, in a low interest rate environment, it is challenging to find relatively low-risk, high-yield and long-duration assets to adequately match annuities that guarantee a minimum annual return. Subsequently, the achievement of a perfect match between assets and liabilities becomes more challenging.
    • Furthermore, continued low interest rates will give rise to investment model modifications and changes in asset allocation in a “search for yield”. Though, investing in more complex asset classes may be a challenge, which may create new risks on the asset side of the balance sheet.
    • A prolonged period of low interest rates may also have an adverse impact on the Non-Life business where, in general, investment returns are used to buffer underwriting results and the effects of inflation on its long tail business (such as disability insurance and workmen’s compensation).
    • As a consequence of the above, low interest rates make it difficult to maintain the required profitability to remunerate shareholders and to continue to offer attractive life investment and savings products to clients, which may hamper new business inflow. Moreover, it will become difficult to maintain the Funds under Management level of “short-term investment type life insurance products”, in case of a sudden increase of interest rates.

  • LSM Insurance
    June 19, 2013 at 5:55 pm

    Hi Ami, That is a good point regarding the different interest environment between now and the early 80’s. This creates a different dynamic.

    Do you see any other companies following suit. What about adjustable longer term policies like an adjustable Term 40 or Term to 85 plan

  • Ami Maishlish
    June 19, 2013 at 5:53 pm

    The concept and design are not new; the timing is. In the (depending on your perspective) not too distant past, the early 1980’s, there as a crop of interest sensitive life products under various marketing names and descriptions that included words such as “flex” and “new money” .

    In those days, for those who may remember, the interest rate pendulum was at the opposite extreme with Canada Savings Bonds yielding close to 20% and mortgages exceeding that rate. The “flavour of the day” at the time was the ill-conceived assumption that interest rates will remain double-digit tagging to ill-conceived projections of such interest rates in to the indefinite long term.

    As interest rates declined over the past three decades, the premiums for those “new”/”flex” products were increased to compensate for the interest rate decline.

    Currently, we have the opposite set of circumstances with interest rate pendulum (at least seemingly) ‘stuck” at the low end. We can’t predict with absolute certainty that there will not be further declines in interest rates, nor that interest rates have hit the basement floor; however, there are IMO many more indicators to an upcoming upswing in interest rates than to a further drop. If interest rates do in fact rise as I expect them to, the new interest rate sensitive life products such as Empire’s Hybrid Solution 100 will become even more valuable to those who purchase these during the current low interest period.

  • LSM Insurance
    June 19, 2013 at 2:23 pm

    Yes it is an interesting trend and product what companies do you think will follow suit.

  • Jarrod Merkel
    June 19, 2013 at 2:21 pm

    FYI Industrial Alliance has just launched a great product into this space and most other companies will follow as the appetite for an interest rate “risk sharing” product is very strong among companies that are feeling the crunch of these low interest rates on permanent guaranteed products sold in the past.

  • Ami Maishlish
    June 13, 2013 at 3:00 pm

    Indications of interest rate hike potential are starting to appear with “adjustments” (upward, that is) of long term mortgage loan rates. The question of “how soon” depends to some degree on economic performance over the next 3 quarters.