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There are many benefits which come with a 30-year term life insurance policy.
It all depends on your reason for buying life insurance in the first place. Most people simply look at life insurance as income replacement.
But, when you are young and just starting out, you might need to consider a longer view of the bigger financial picture down the road.
People are living longer and working longer. Financial needs change as you progress through life. Although we can’t know what the future holds, you can provide better financial security by considering a longer-term policy.
Here’s what you need to know about a 30-year term life insurance.
30 Year Term Life Insurance is Inexpensive
Most people considering a 30-year term policy are likely in their twenties or early thirties. You are probably looking for an inexpensive policy to cover you until you retire.
A term life policy is the least costly policy to buy especially when you are young. Buying life insurance when you are younger is the best time to buy a policy. It becomes increasingly expensive as you get older.
A 30 year old man looking for a $500,000 no exam term life insurance policy for 30 years who is a non-smoker and in excellent health will likely only have to pay around $33.00 per month or $379.00 annually.
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A similar permanent policy such as Whole or Universal Life can cost you as much as 10 X more. Clearly, a 30 year term life policy is much more affordable.
The majority of term policies sold today ensures that premiums are fixed for the life of the term. This means the premiums never increase over the life of the term.
If you were to purchase a 20-year term and needed a longer period of coverage, you might have to renew a policy. But, in the meantime you will have aged 20 years and your health might have declined.
Were you to buy a 10-year term policy at age 50 for a “Standard” health rating for a $500,000 policy you could now expect to pay around $86.00 per month or $995.00 annually.
The difference in savings can be quite significant.
Life cover insurance
Remember, that’s what the 10-year term costs right now but it’s actually going to cost a lot more 20 years from now.
Or, consider what happens if you die 22 years from now – after the 20-year policy expires. What if you don’t have much in the way of life savings? What will happen to your family then?
20 years might seem like a long time when you are young, but it is really only a relatively small portion of time when you look at it from different perspectives.
The other reason why a 30-term policy is the better buy is because you can also cancel it anytime before the expiry of the policy if you no longer need the coverage.
If you need more coverage later on in life, you can opt to buy a second policy for a smaller amount and for a shorter term. This approach allows you to always have the coverage you need.
Reasons Why a 30 Year Term is a Better Choice
Far too many younger people are choosing a 20-year term these days. They may be running the risk of shorting themselves of having adequate coverage later in life.
Consider your overall needs when it comes to buying life insurance.
Although income replacement is an obvious reason when it comes to selecting how long you want the policy to last – will it really be enough?
And, did you really consider all the other possible reasons why you might need life insurance?
Maybe you just purchased a home and are about to start a family. Will a 20-year term policy be long enough? Most likely it won’t.
Most mortgages these days in America are taken on average for 30 years. Although many people plan to pay off their homes before then, it often doesn’t work out that way. You want your surviving family members to maintain a lifestyle they are accustomed to living.
A 30-year term will ensure your family will continue to live the same way when you were alive. They will be able to pay off the mortgage or use the insurance proceeds anyway they need.
Another thing to keep in mind is that people often sell the family home and often buy another home later on in life.
People also divorce and remarry. This requires other financial commitments which you might not have taken into account.
Although we like to think that our savings and investments are going to gradually increase, you should never assume the economy won’t incur a sever downturn. You’ve likely recently seen how the life savings of many people were virtually wiped out during the last recession.
When it comes to predicting your financial future – never assume that the worst possible scenario won’t happen.
Use a 30 Year Term for the Children
You will want to ensure your children are well provided for so they can have a good start in life. Although you might have a 1 year old child at the moment, what if you have a couple more over the next 10 years? Families don’t always plan to have more children later in life, but it happens unexpectedly.
Every parent wants to give their child the best opportunities possible. You will want to ensure the policy lasts until all of your children reach 18 years of age at least.
A 20-year term policy simply won’t provide coverage for children born later on in life.
Many people also want their children to have the best education possible. Life insurance can be used to cover the expensive cost of today’s expensive college education.
Even if your child was born just after you bought a policy, you might want to ensure your coverage lasts until they complete their college education. This means they would be around 22 years of age before they graduate.
A 30 Year Term Provides Better Protection for Your Spouse
The average lifespan in the U.S. today is 76 years of age for a male and 81 years for a female. Suppose you are the primary breadwinner and your spouse is either a stay at home partner or only works part time.
Will a 20-year term really provide long enough coverage for your spouse? Most likely it won’t. But a 30-year term can be the ideal solution to provide that extra time length of coverage to ensure your spouse is financially viable into their old age.
The health of your spouse is likely going to decline as they get older. Your spouse may require covering huge expenses not covered by your current health plan. The cost of nursing homes, homecare and prescription medication continue to increase dramatically.
And, let’s not forget the cost of inflation which many people neglect to take into account when considering life insurance. A 1.5% increase in inflation might not seem like much for a 1 year period, but consider how much that’s going to mean over the next 30 years.
Everything is going to become more expensive including the cost of a replacement life insurance policy later on.
Our life spans keep increasing with medical advances, so it’s important you take into account the big picture.
Would a Permanent Policy Be Better?
For people with large estates, or those who need to consider other investment options, a permanent policy might be a better choice.
Car insurance policy
Keep in mind however that a permanent policy will cost you about 10 times more than what you would pay for an equivalent 30-year term policy. The average American may not be able to afford these more expensive premiums.
For most people looking to invest in a retirement savings vehicle, you might look at what you would save by buying a term policy and investing the difference.
You might be thinking about all the money you will be spending on a 30-year term policy. If you were to survive to the end of the term, you might be upset at the idea that you have nothing to show for all that money you spent.
There is a way you recoup these premiums. You can have a nice chunk of change to use for your retirement, and we explain how this works just below.
Consider a 30 Year Term Return of Premium Policy
There’s another 30-year term policy to consider. This is known as a 30-year term “Return of Premium” (ROP) policy.
For an extra premium you can buy a rider known as Return of Premium. This rider ensures that you will receive 100% of the premium payments you have made over 30 years.
Using the sample above, the 30-year-old that was paying $379.00 per year for their 30-year term policy will receive a total of $11,370.00 at the end of the 30 year term.
The only catch is that you must survive for the entire 30-year term policy you own.
Always Use an Independent Agent to Buy a 30 Year Term
You should always use an independent agent to buy a 30-year term or 30 year term ROP. The cost for this policy can vary significantly from company to company.
Independent agents can shop around and compare the costs of dozens of life insurance companies. They can help you create customized policies for a variety of different financial circumstances.
These agents also specialize in finding low cost solutions for those who have a variety of medical conditions. So, always use an independent agent when it comes to finding affordable life insurance.