There are two basic types of life insurance: Permanent and Term. Permanent is… well, permanent. Term is for a period of time say 10, 20 or 30 years. Unless you’ve been hiding under a rock, by now you have probably heard the “talking heads” say NEVER buy permanent life insurance; it’s too expensive. The purpose of this post is not to approve or disapprove of the cost of permanent life insurance. The fact is we all need life insurance it’s just that the reason we need life insurance changes over time.
There are a couple of things I want you to take away from this post and the first is that you need to purchase life insurance as earlier as possible. Why? You ask. When we are young the cost of insurance is super low because we have a long life ahead of us and generally speaking, most of us are the healthiest we will ever be. Meaning, as we age, we tend to develop health issues that affect our life expectancy which equates to higher cost of insurance unless you can lock-in your insurability early. Purchasing a policy in your early 20s could score you a preferred or even premier rating. The higher your rating the lower your premium. This is a very good thing.
So, what do we know about Term Life Insurance. Again, unless you’ve been hiding under a rock somewhere you know that it is the absolute cheapest life insurance on the planet. There’s just one problem. It expires worthless, unless renewed. If you get a 30-year term policy at the age of 20, when you turn 50 you either renew the policy for another 30 years or you lose your coverage all together. Remember, we all need life insurance so losing your coverage is not an option. One thing I can promise you is that your premium will increase substantially. Why? You ask. Because you are 30 years closer to death and as such you are a bigger risk/liability to the insurance carrier meaning the likelihood they will have to pay a death benefit on your policy is considerably higher than when you were 20. It’s entirely possible you will not be able to afford these higher premiums. It’s worth mentioning here that if you owned a permanent life insurance policy you would not have to contend with renewals.
Ok, so you agree you need life insurance and that you should purchase it as earlier as possible, but you just can’t fit it into the budget. I am a huge fan of permanent life insurance, but it does require a little more of a financial commitment. So, if you cannot afford permanent life insurance when you are in your 20s or 30s we need to find a solution that can work both now and in the future. Remember you want to lock-in your insurability, and you want to avoid the renewal periods if possible. The solution is Convertible Term Life Insurance. This is the ONLY type of term life insurance I will recommend to a client. You can purchase a lot of coverage for a relatively small premium, you lock-in your insurability AND you can convert to a permanent life insurance policy at a later date when your financial situation improves. Wow! Now that’s a term policy I can get behind, at least until you can afford the permanent coverage you need.
Think about this. You purchase $250,000 of 20-year term at 20 years of age and qualify for a premier rating. At age 38 you are diagnosed with terminal cancer. If you try to purchase permanent life insurance, you will be declined because you are now uninsurable. BUT you own a convertible term policy and that not only means you can get a permanent life insurance policy but also means your premier rating will transfer to the new permanent life insurance policy. You have terminal cancer and you just landed $250,000 of permanent life insurance with a premier rating!
Call 304.840.0706 for a life insurance quote today and let’s lock-in your insurability and convertability.