Level term life insurance is by far the most popular life insurance policy because it is inexpensive and relatively easy to buy. It is offered in guaranteed level premium periods of 5, 10, 15, 20, 25, 30 years as well as lifetime. But the reason that level term is so cheap is that it is temporary insurance and not designed to last forever. In fact, very few claims are paid on term policies because most people out live their coverage. For this reason, it is extremely important that you purchase the right level term policy.
Buy a 10-year Level Term Now and Replace It Later
In most cases, a ten year level term policy will be the cheapest policy that you can buy. The reason is that the insurance company is “on the hook” at the level rate for only ten years. In other words, the insurance companies know that over an extremely large number of people, very few will die during the initial ten year period and most will drop the coverage or replace their policy before their life expectancy.
If you are considering buying a 10-year term policy because it is the cheapest plan, please know that if you need the coverage beyond ten years there are some risks. For example, if you buy a 10 year term and your real need is 15 or 20 years, you are going to have to purchase an additional policy in the future to adequately protect your needs. This assumes you will be in good health at that time and can qualify for a competitive rate. No one has a crystal ball and you certainly do not know what your future health will be so trying to save money now by buying a 10-year term policy when you really should buy a 20-year term policy now is a mistake. Additionally, while rates are low now, you do not know what the rates are going to be in the future and this simply cannot be predicted.
Buy the Longest Term Possible
The longer the guaranteed level term period you choose the more expensive the policy. The reason is that as you approach life expectancy, there is a significantly higher probably that the insurance companies are going to pay some claims.
If you are considering purchasing a level term policy for 20 or 30 years or even looking at a lifetime guaranteed term policy, carefully weigh the pros and cons of spending the extra money for these guarantees. In other words, do not use term insurance (unless you are considering lifetime guarantees) to try to cover your life expectancy as you will still likely outlive your policy. Life insurance companies are in the business to make money and know over the long run that very few of these claims will be paid (there is a great chance you will outlive your coverage). If you want your policy to be in effect when you die, the only sure way to achieve this is with lifetime guarantees. Do not make the mistake of trying to use 20 or 30 year level term insurance to cover your family’s financial security.
Buy Multiple Policies with Staggered Level Term Periods
The most popular level term plans offer 10, 15 and 20 year guarantees. You can choose longer guarantees such as 25 or 30 year term or even lifetime guaranteed rates, but the value in most cases is 20 year or less. Beyond a 20 year term, policies are significantly higher in cost, unless you’re under age 40.
A great way to buy level term insurance is to buy multiple policies and stagger coverage at different level term periods. For example, if you needed $2,000,000 of term insurance now, because your kids were still young, but in 10 years you only are going to need $1,000,000 of protection, you can buy 2 policies that effectively meet your needs without carrying excess coverage and subsequently overpaying for life insurance. In this case, you could buy a $1,000,000 10-year term policy and another $1,000,000 for 20-year guaranteed policy. This strategy would give you $2,000,000 of coverage for the first 10 years and $1,000,000 that would continue in years 11-20 at a fixed rate. This strategy would meet your needs effectively and save you money.
The staggered or laddering approach to buying life insurance is extremely attractive for professionals that want to protect their incomes but do not expect to have the same large life insurance needs over a long period of time.
Why Am I Buying the Life Insurance?
Everyone that buys life insurance has different needs, goals and objectives. The first thing you should do when determining the level term period of your life insurance you should buy is to ask yourself the question, “What is the real purpose for the insurance?” or “Why am I buying life insurance in the first place?” This is the best starting point and your answer could be based on a combination of any number of factors including income replacement, coverage to retirement, protecting your mortgage and providing funds for your child’s college education. By focusing on the reason why you’re buying the insurance, you can “lock-in” your level term period and the lowest possible rate for that period of time. When you figure out why you are buying the insurance, ask yourself “how long do I need to maintain this insurance to cover these needs?” Your answer to this question will help you narrow down the level term plans you should consider and allow you to make the best policy(s) choice.
When buying level term life insurance, please make sure that you consider all of your options and focus on your specific needs. Your goal should be to lock up your rate now for the period of time you feel you will need the coverage and hope that you never have to use the policy! For more information, please call MEG Financial NOW at (877) 583-3955 or request an instant level term life insurance quote.