Business Development Officer, T.D. McNeil Insurance Services, Fresno, California
You should select a life insurance plan that provides the level of protection you need through the entire period that the potential for loss exists. If it is to cover the mortgage, then a policy tailored to pay the principal of the mortgage might be all that is needed. It is a human tendency to think that we won’t suffer loss as we grow older. That is not necessarily true.
Knowing what life insurance term you should get is something you can best discern for yourself, when you understand how term life insurance is priced.
When you purchase a term life insurance policy, you are usually locking in the premium so that it will not go up for a certain number of years. This can be as short as one year or as long as 30+ years.
When you choose a longer term, you will find the price is much higher than the premium for a shorter term. That is because the policy is covering a greater risk as you get older. E.g. If you are age 40 now and take out a 10 year term policy, that policy is only covering you to age 50. If you take out a 30 year term policy, it is covering you to age 70. The chance of your dying at age 70 is much greater than at age 50. And life insurance costs are higher where there is greater risk of death.
Term policies roughly average out the cost of insurance for each year you have the policy, and charge you that same price for the entire term. So in the first years of the policy, you are paying more than a person your age would be paying for that risk. In the latter years, you are paying less than a person that age would normally be paying.
The advantage to longer terms really shows up when health is taken into account. You may have no trouble getting a preferred rating at age 40. But to get rated preferred at age 50 or 60 is not as likely. Therefore, having a preferred rating locked in for 30 years offers a huge price advantage to the poor soul who gets rated preferred for a 10 year term policy at age 40, standard at age 50, and table 4 at age 60.
Getting longer terms is not for everyone. If you definitely only have a short term need, there is no reason to pay the higher cost of a longer term policy. But IF there is a chance you may need longer coverage, as you can see, locking it in while you are healthy is never a bad idea.
President, The Firm of Steven H. Kobrin, LUTCF, 6-05 Saddle River Rd #103, Fair Lawn, NJ 07410
I love this question because people ask it every day. I am going to give you an answer that may surprise you, but that is the goal. I want you to think about the importance of this product to your family and business.
Option#1 would be "lifetime term". This really would be a universal life product with a lifetime guarantee and no intended cash accumulation. It would essentially be "permanent term". Buy this product, and you probably will not have to worry about life insurance again.
Option#2 would be 30-year term. This should be sufficient time to grow a business as well as help your children become independent. Remember that the rule of thumb used to be 20 years, but these days, many businesses and many families need coverage for longer than that.
Option#3 would be 10- or 15- year term. I would buy this only if I had a mortgage, business loan, divorce decree, or other obligation that lasted specifically 10 or 15 years.
Then again, if you had a tight budget, you could buy 10-or 15- year term and then buy a policy with a longer guarantee when you have the money.
I recommend locating an Independent agent who specializes in Life Insurance to determine which term policy best suits your needs and budget. Also which length of term policy ( 10,20,30 years) taking into account your immediate needs for coverage as well as in the future. This is time well spent in determining what is best for you...
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When you purchase a term life insurance policy, you are usually locking in the premium so that it will not go up for a certain number of years. This can be as short as one year or as long as 30+ years.
When you choose a longer term, you will find the price is much higher than the premium for a shorter term. That is because the policy is covering a greater risk as you get older. E.g. If you are age 40 now and take out a 10 year term policy, that policy is only covering you to age 50. If you take out a 30 year term policy, it is covering you to age 70. The chance of your dying at age 70 is much greater than at age 50. And life insurance costs are higher where there is greater risk of death.
Term policies roughly average out the cost of insurance for each year you have the policy, and charge you that same price for the entire term. So in the first years of the policy, you are paying more than a person your age would be paying for that risk. In the latter years, you are paying less than a person that age would normally be paying.
The advantage to longer terms really shows up when health is taken into account. You may have no trouble getting a preferred rating at age 40. But to get rated preferred at age 50 or 60 is not as likely. Therefore, having a preferred rating locked in for 30 years offers a huge price advantage to the poor soul who gets rated preferred for a 10 year term policy at age 40, standard at age 50, and table 4 at age 60.
Getting longer terms is not for everyone. If you definitely only have a short term need, there is no reason to pay the higher cost of a longer term policy. But IF there is a chance you may need longer coverage, as you can see, locking it in while you are healthy is never a bad idea.
Option#1 would be "lifetime term". This really would be a universal life product with a lifetime guarantee and no intended cash accumulation. It would essentially be "permanent term". Buy this product, and you probably will not have to worry about life insurance again.
Option#2 would be 30-year term. This should be sufficient time to grow a business as well as help your children become independent. Remember that the rule of thumb used to be 20 years, but these days, many businesses and many families need coverage for longer than that.
Option#3 would be 10- or 15- year term. I would buy this only if I had a mortgage, business loan, divorce decree, or other obligation that lasted specifically 10 or 15 years.
Then again, if you had a tight budget, you could buy 10-or 15- year term and then buy a policy with a longer guarantee when you have the money.
What do you think? Does this system make sense?