10-Year Term Life Insurance may be your best solution

I had a call the office the other day from a couple looking to purchase life insurance. They were 31 and 30 years old, just had a new baby, owned a small business and were looking to purchase life insurance on each other each other and their new child.

I found out that they had very limited assets as they were just starting out. It is safe to say their biggest asset was each other and their ability to earn a living in their business.

They had heard that term life insurance is the best insurance to own. The couple wanted to purchase two 20-year term policies, one on each spouse. They came to me because they were looking for the best price on the insurance and knew I was an independent carrier with access to 80 different carriers.

Not knowing anything else about them, I agreed that term was their best solution.

I asked the question though "What happens if the heart attach doesn't kill you?"

Kind of shocked and confused, the young couple looked at each other then looked at me and said "What do you mean?"

Remember, life insurance only pays a benefit if one of you pass away. If there is a major illness like a heart attack or cancer that doesn't lead to your passing, there won't be a benefit to support your family.

20-year term life insurance is guaranteed for 20 years, however you pay a 30-50% premium in the first 10-years to be sure you have the same insurance rate the second 10 years.

For example, a 31 year old standard health male would pay $600 per year for $1MM of 10 year term and $900 per year for 20 year term.

That is $300 per year extra. (FYI, assuming a 31 year old lives to 41, they can apply for a new 10 year term. The 10-year term price for a standard 41 year old is $900, the same price as a 20 year term!!)

The $300 savings can be used toward insuring other risks like the inability to work. Remember, the largest asset my couple had was their ability to run their business.

Now I know someone might be asking "But Kevin, what if at the end of 10 years I can't get a new policy because of health issues?"

Great point! This needs to be addressed.

There are two types of 10-year term policies. Renewable and non-renewable. Non-renewable policies end at the end of the "term". Therefore a Non-renewable 10-year term would end at the end of 10-years and in order to have life insurance, one would have to apply and be accepted for a new policy.

Renewable term policies can be renewed after the guaranteed period (in this case 10 years) on a year to year basis and be held for a specified age usually to age 95.

Therefore, your worst case scenario is that after 10-years, you have an increase in your price if you are uninsurable but you saved $$$ for the first 10-years that either allowed you to save more or purchase insurance to cover another very important insurance coverage.

There are other strategies to consider too.

A financial plan is only as strong as its weakest link. Finding the best priced insurance policy from a strong insurance company and purchasing a 10-year term policy instead of a more expensive 20 or 30 year term provides for the same insurance protection and allows you to strengthen your overall plan so you can get farther ahead financially.

Understand your choices, make an informed decision.


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