Everyone’s life insurance needs are different, but most of us will need less life insurance coverage as we get older. Once the house has been paid off and the kids have moved out, our need for life insurance is minimal, but many of us will still need some coverage for final expenses.
In this article, we’ve explained some lesser-known strategies that can help you customize your term life insurance coverage. Strategies that decrease your coverage as your needs decline will save you money, while still providing your family with the protection they need. We’ll also explain how you can convert some of your term life insurance coverage into permanent coverage, without a new health screening!
Our agency works with over 60 top-rated life insurance companies to make sure we always match our clients with the most affordable life insurance coverage available… Continue reading and we’ll share our experience to help you save even more.
Quick Article Guide:
1. Layering or Staggering Your Life Insurance Coverage
2. Life Insurance Rates for a 54-Year-Old Male in Excellent Health
3. Decreasing Your Term Life Insurance Policy
4. Life Insurance Rates for a 50-Year-Old Male with Type II Diabetes
5. Converting Your Term Policy into a Permanent Policy
6. How We Can Help You Select the Best Insurance Option for Your Needs
Layering or Staggering Your Life Insurance Coverage
Most of our clients purchase life insurance for a variety of reasons: to provide income replacement to their families, to protect their mortgage, to insure their children have money for college tuition, etc. If you have more than one reason that you need insurance, layering life insurance can save you thousands of dollars.
Layering life insurance involves buying two or more life insurance policies with varying term lengths, and each policy is set up to protect a specific life event. Over the years, we have helped hundreds of clients save money by layering or staggering their life insurance coverage. To illustrate how layering life insurance policies can save you money, we’ll use a real-life scenario from one of our clients as an example.
Here’s a Real-Life Example of Layering Life Insurance:
Last month we worked with a 54-year-old client who has a $250,000, 20-year mortgage, and two teenage daughters that will be attending college within a few years. He wanted to make sure his family is able to keep the house if something happens to him before the mortgage is paid off. He also wants to make sure his daughters have the money they need to finish college if something happens to him before they graduate.
After speaking with his colleagues who have children in college, he felt that $125,000 per daughter was enough coverage to secure the cost of their tuition. In this situation, most life insurance agents would probably recommend buying a 20-year, $500,000 policy ($250,000 to secure the mortgage and $125,000 for each daughter’s tuition). However, in 8-10 years, when his daughters graduate college, he won’t need $500,000 of coverage.
Instead of buying one 20-year policy for $500,000, we recommended purchasing two life insurance policies. One 10-year, $250,000 policy to protect his daughters until they graduate, and one 20-year, $250,000 policy to protect his mortgage. This strategy will provide him with $500,000 of coverage for the next 10 years, and when his daughters graduate, he’ll still have the protection he needs for his mortgage.
By layering his policies, our client was able to secure both his daughters’ college expenses, and his mortgage for a fraction of the price. Below is a chart that illustrates the cost of a $500,000, 20-year term policy for a 54-year-old healthy male, versus buying two $250,000 policies for 10 and 20 years.
Life Insurance Rates for a 54 Year-Old-Male in Excellent Health
Below we have provided a real-life example that illustrates how layering or staggering your life insurance coverage can save you thousands of dollars.
Layering or Staggering Your Life Insurance Policies vs Buying One Policy
| Length of Policy | 10-Year Level Term | 20-Year Level Term | 20-Year Level Term |
|---|---|---|---|
| Coverage Amount | $250,000 | $250,000 | $500,000 |
| Monthly Price | $34.79 | $59.11 | $111.36 |
| Total Price | $4,174.80 | $14,186.40 | $26,726.40 |
*Displayed monthly rates are accurate as of 03/15/2017
By layering or staggering his life insurance policies, our client will save a total of $8,365.20 over the next 20 years on his life insurance. In addition, in 10 years when he retires and has a fixed income, the cost of his coverage will drop to $59.11 per month.
Layering or staggering your life insurance policies will save you even more money if you are older, or if you have a few health issues. If you would like to compare your options for coverage, or determine whether or not layering your life insurance coverage will save you money, please feel free to call us at: 855-902-6494, or request a free quote online.
In the next section, we’ve explained how decreasing term life insurance can also save you a considerable amount of money over time.
Decreasing Your Term Life Insurance Policy
Another popular strategy for saving money on life insurance is to purchase a term life insurance policy that allows you to decrease the amount of coverage you carry as you get older. This strategy allows you to reduce your monthly cost of coverage as your need for life insurance decreases.
Decreasing your term life insurance generally provides you with more flexibility than layering your life insurance, but it’s important to note that not all life insurance companies allow policy reductions, and some companies only allow one policy reduction during the term of your policy. Our agency works with a handful of top-rated companies that will allow you to reduce your coverage as often as once a year if needed.
Here’s a Real-Life Example of Decreasing Your Term Life Insurance Coverage:
We recently worked with a 50-year-old male named Lloyd who purchased life insurance to protect his income for his family if he passed away before retirement. He plans to retire before the age of 65 and each year he makes about $200,000 dollars. Lloyd has a few health issues so to save money on the cost of his coverage, he wants to be able to reduce his coverage as he gets older.
Life Insurance Rates for a 50-Year-Old Male with Type II Diabetes
Below, we’ve provided the actual rates for Lloyd’s life insurance policy for each year as he decreases his coverage. Lloyd was approved at a “standard” or average weight class due to his well-controlled diabetes, blood pressure medication, cholesterol medication, and daily use of cigars.
Reducing Your Life Insurance Coverage as Your Need for Life Insurance Decreases
Policy Year Year 1 Year 2 Year 3 Year 4 Year 5
Coverage Amount $3,000,000 $2,800,000 $2,600,000 $2,400,000 $2,200,000
Cost of Coverage $904.05 $844.29 $784.53 $724.77 $665.01
Policy Year (Cont.) Year 6 Year 7 Year 8 Year 9 Year 10
Coverage Amount $2,000,000 $1,800,000 $1,600,000 $1,400,000 $1,200,000
Cost of Coverage $605.25 $545.49 $485.73 $425.97 $366.21
| Policy Year (Cont.) | Year 11 | Year 12 | Year 13 | Year 14 | Year 15 |
|---|---|---|---|---|---|
| Coverage Amount | $1,000,000 | $800,000 | $600,000 | $400,000 | $200,000 |
| Cost of Coverage | $306.45 | $262.53 | $198.81 | $135.09 | $86.67 |
*Displayed monthly rates are accurate as of 03/15/2017
By reducing his coverage each year, Lloyd was able to save over $74,000 on the cost of his life insurance while still providing his family with enough life insurance to replace his income. Lloyd intends to use the money he saves each month to help him pay off his mortgage a few years earlier.
We’ve helped hundreds of clients over the years with reducing their coverage amounts each year. This strategy is also popular for people who are purchasing life insurance for divorce decrees or small business loans. If you would like quotes to determine if this strategy is the right fit for you, please feel free to give us a call at: 855-902-6494 or request a free quote online (at the end of this page).
Please Note: Not all life insurance companies allow you to reduce the amount of coverage you carry each year. If you are considering purchasing a life insurance policy that allows face amount reductions, please let your agent know before you apply and accept your coverage.
Converting Your Term Policy to Permanent Coverage
For most of our clients, once their term has ended, their need for life insurance has diminished. However, some of our clients still need to carry a small amount of coverage to pay for their final expenses and burial costs. Consequently, as we get older most of us have a few health issues that prevent us from being able to buy an affordable burial policy.
Thankfully, many term life insurance companies offer a conversion option. A conversion option allows you to convert some or all of your term life insurance coverage into a permanent coverage. The best benefit of converting your term policy is that, even if your health has declined, you will still be able to lock in the rate class that you were originally approved at.
Here’s a Real-Life Example of a Client We’ve Helped with a Term Policy Conversion:
Last year, we worked with a client named Linda who needed to convert her term life insurance policy into permanent coverage. Linda is retired and her mortgage has been paid off, but she wants to leave some money behind to pay for her final expenses.
Linda had purchased a term life insurance policy about 20 years prior, but her term was getting close to ending, and her coverage from work ended when she retired. She had also tried to purchase a new policy, but none of the companies would offer her immediate coverage due to her recent treatments for breast cancer.
Thankfully, Linda still had the option to convert her term policy into a permanent policy. In addition, she was still eligible for the “preferred” rate class she received almost 20 years ago, regardless of the changes to her health. After reviewing the cost, Linda decided to convert her $250,000 term life insurance policy into a $50,000 permanent life policy.
Please note: You must convert your term policy to permanent coverage before your term expires. In addition, some life insurance companies also have a cut-off age where you can no longer convert your term policy in permanent coverage. For most life insurance companies, the cut-off age is 70 or younger.
How We Can Help You Select the Best Insurance Option for Your Needs
Every life insurance company has its own underwriting guidelines and their own unique products. By working with 63 top-rated life insurance companies, we’re able to match our clients with the best life insurance options available for their needs.
Our agency is owner-operated and we offer 50 years of collective experience. Most importantly, our services are free and our agents do not have sales quotas. Our only goal is to provide our clients with outstanding customer service and a consultative approach to life insurance.
Give us a call toll-free today at 855-902-6494, or request a free insurance quote online below to instantly compare rates from dozens of “A” rated life insurance companies.
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