Many people make a decision early on that they will pay for term life insurance coverage for their entire life. When considering a life insurance purchase however, it is important to think about how long you will really need financial protection.
An important consideration when making a life insurance purchase is whom the beneficiaries are, and how long they will need funds from you while you are alive. There comes a point in most people’s lives where they become financially independent from their parents. As a term life insurance policyholder, one has to ask if life insurance is necessary once the children are grown and on their own. It may be that a spouse would be in need of funds if the main income earner dies, but it is likely that the amount of insurance required would be substantially less than say a married father of four very young children.
If you are the main income earner in your house with young children, a 20-year term policy may be the best option. This would protect the children in the event that you die before they are old enough to provide for themselves. If you need protection for a spouse as well, a 30-year term can be considered. As an alternative, a 20-year term can be implemented to provide protection for the children, and then after 10 years, another 20-year term can be obtained for the spouse with a lower limit.
Bear in mind however that affordable life insurance gets more expensive as you age. After 50, premiums get very expensive and after 65, coverage will become difficult to obtain. Accordingly, it makes sense to obtain coverage at an early age, but even more important, long-term savings strategies provide the best type of financial protection. Payment of insurance premiums after retirement will eat into retirement funds that will be needed to provide the essentials once a working income is no longer available. Every situation is unique however, and a qualified life insurance agent or broker should be consulted before making important life insurance, wealth building and retirement strategies.
Most term life insurance companies will require a health exam before qualifying someone for coverage. People who lead unhealthy lifestyles such as smokers, and people with chronic health conditions will pay more for their life insurance. There are however a class of term life insurance policies called “guaranteed issue policies”. This type of life insurance does not require a health exam. These policies are often called mortgage insurance policies, because they are issued solely for paying off a loan in the event of death. These policies are expensive in two different ways. First, the premium at the start of the policy is simply higher per $1000 of coverage that a typical term life insurance policy. The second problem with a mortgage insurance policy is that the value that you receive for your premium dollar goes down as you pay off your mortgage. At the outset, the premium may be somewhat reasonable for the coverage received, but as you reach the final years of your mortgage payoff, the premium is no longer appropriate for the coverage required.