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 How much for term life insurance? compared to whole life? |
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bcr1978 | Should i get 20 year term or a 30 year term life insurance? |
My husband and I currently have a 20 year term life insurance policy. We are switching companies because we were paying too much at State Farm. I'm 30 and he is 33 and we are both in very good health. We have a 9 month old baby boy and our policies are for $500,000 each. The rate I'm getting is $45 for both of us for the 20 year term and $70 for both of us for the 30 year term. Which one should I go with?
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I know it will be expensive to get a new policy in 20 years when it expires but won't it be even more expensive when i have to get a new policy in 30 years when i'm 60? |
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Brian
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First, please do not cancel your current policy until you have a new one in force.
With term insurance, you can break this down into 2 components:
1 - the term
2 - the need (the amount of coverage)
First, let's first look at your specific question regarding the term. If in 20 years you do not project you need insurance, save your money and just get 20 year. Reasons to get a 30 year:
- you are young
- you have a 30 year mortgage and need the income to keep the house
- you do not know if you need 30 year (you want the option of paying/stopping the premium after 20 years).
I will not go into determining the need amount, since I assume you already did a detailed analysis of this. I do think you *may* be "light" on the amount. Use an insurance needs calculator like http://moneycentral.msn.com/investor/calcs/n_life/main.asp.
If you find out you need more, you may just keep your current policy and buy an additional 20 or 30 year policy with another company to make up the difference. It costs a bit more, but you do spread out the risk of one of the companies going under, 30 years is a long time. Also, if down the line you do not need as much insurance you can just cancel one policy.
Another person stated to get an annual premium, not monthly, I agree. It costs a lot less. I used http://www.reliaquote.com to get competitive rates for my family. I recommend it. |
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Crystal Clear
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Go with the 30 year term it will be the most affordable now. I f you try to get a new term polocy in 20 years it will be about twice as expensive. |
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Doctor Deth
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Is that Level term? the $45 or $70/month won;t change? - you're probably better off with the 30 yr term, that will take you to retirement age almost and you should only need a small policy at that time - you should have your retirement savings in order by then |
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Insurance Pickle.com
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"I know it will be expensive to get a new policy in 20 years when it expires but won't it be even more expensive when i have to get a new policy in 30 years when i'm 60?"
First of all you're going about it all wrong. If you think you need insurance beyond 20 years then a 20 year policy SHOULDN'T even be a consideration. And if you need it beyond 30 years then that shouldn't be a consideration either as you should be looking at a universal life policy with a guaranteed premium to age 100 (or a combination of policies)
Figure out what you need and for how long (as best you can) and then buy the policy.
Second of all I'm glad you figured out that you don't buy life insurance from a car insurance company; however, assuming you're in great health you could do 10-15% better than what you quoted. Check out the quoting tool on my site as you'll likely see the company you got a quote from and ~149 other companies. It requires no personal information to use.
http://insurancepickle.com/life-insurance |
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C
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As an insurance agent, I always advise my clients to get the longest available term. Reason why is that, at your young age now, you are able to lock in your rate for 30 years vs 20 years. If you are getting the level term policy, your rate wont change!
You are going to have to do the medical again when your 63, and will at that time definitely get an increase in your monthly premiums, BUT, youd much rather benefit from paying a lower premium for the extra 10 years the 30 year plan would give you.
Also, if you can afford it, pay it in full for 1 year instead of monthly installments, so you dont have to pay the extra monthly charges, and that way even avoid missing a payment and getting your policy cancelled. Reinstatement of a life policy is a headache.
If you cant pay in full, request to get it automatically withdrawn from your account, which in most cases has a lower monthly charge then paper bills. |
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src50
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Go with the 30 year term. When that expires, you won't need the same level of coverage. |
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Professor Wonderful
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The following information is not to be construed as practitioner/client advice.
You can discover what the investment is for a whole life (WL) policy (or variation thereof). If you intend to live longer than 20 or 30 years, the savings for the whole life policy can well outweigh the initial deposits. In the case of some policies, you may find the WL policy to have great growth in the cash value portion. That would mean the insurance portion for the WL policy will be less than the cost of the term insurance policy, be it 20 or especially 30 years.
Your child should be likewise covered for many reasons. One, your infant has crossed the six-month threshold. The deposits will never be lower than they are now. Two, your infant will some day wish to purchase a home. The cash value of the WL policy can be enough to easily provide the down payment to go with the pre-nuptual agreement to protect his non-community assets. Three, if the child becomes well-off financially, as a senior citizen he will require the cash to cover estate expenses. Four, if the child retires and is not financially well-off, he will need the cash value to live on.
If you simply cannot afford the deposits to the WL policy, and you believe you will live longer than twenty years, the thirty year policy might, might, might be a better choice in your situation as mentioned.
Are the new policies convertible?
Will a new incontestibility period commence?
Is there a common disaster cause?
If there is a single-car accident which is ruled a suicide, does the new policy immediately cover suicide (without a court trial to 'prove' it really was an accident)?
A competent agent is not going to risk his license providing too much information than a prudent man would surmise is applicable. Please contact a CLU (Chartered Life Underwriter) or a ChFC (Chartered Financial Consultant).
If you have saved old telephone books in your garage - as I recommend to my clients - get the oldest book. Look in the insurance section for CLUs and ChFCs. Call the number. If the person is still practicing, you are then likely to have an incredibly competent person with massive experience. |
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mbrcatz
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If you already know you're going to need to renew the 20 year term policy, then buy the 30 year term. Plan on not renewing it, by investing heavily over the next 30 years.
Also, get that quote redone, for an ANNUAL payment, rather than monthly - it could easily save you $100 per policy, or more, not having those installment fees. |
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