I’ve found that one of the hardest things to decide when getting quotes for term life insurance is what term length is best. The reason it’s such a challenge is that the truth is that not all of our needs go away at once. A good independent life insurance agent can show you how to stagger, or layer your term insurance to make it more appropriately fit your actual need.
Generally, when faced with the decision, a person will take the total amount they need, say $1,000,000 and they will determine when the last of the need will go away. Let’s say for the purpose of this exercise that they will be through with the need for that $1,000,000 in 20 years.
A good life insurance agent is going to ask if they really need all of that insurance for the full 20 years. In this case the client might say that about half of that will not be necessary after 10 years because, let’s say the children will be out of college and the house will be paid off. The other half really needs to stay around for “at least” the full 20 years as that will get them close to retirement. Notice they said “at least”
So a good recommendation would be, rather than purchasing $1,000,000 of 20 year term, buy three policies. $500,000 of 10 year term (the first need to go away) $250,000 of 20 year term (when the 2nd need might go away) and $250,000 of 30 year return of premium term or straight term insurance just to cover the “at least”.
If they get out there 20 years and don’t need coverage any longer, they can cancel the 30 year term, but if they do need it longer they have their bases covered and at the end of the 30 years they get the premium back on the “at least” policy. That third policy may also be one they choose to do a conversion on to have a small universal life policy that goes on forever.
Are all of your eggs in one basket?
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