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should i get 20 or 30 year life insurance policy?
Old 08-16-2010, 11:11 AM   #1
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should i get 20 or 30 year life insurance policy?

i'm 36, married, with one child and probably a second in the near future. should i get a 20 or 30 year term life insurance policy?
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Old 08-16-2010, 11:21 AM   #2
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I'm in a similar situation and went with the 30. It wasn't much more and I've met too many people who become uninsurable when their term comes up.
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Old 08-16-2010, 11:22 AM   #3
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Determine the precise income/wealth replacement purposes for the life insurance and estimate when those needs will be gone. I'm 37 with two young kids and my DW and I have 20 year terms because the money is intended to fully replace my income so that my DW can raise the kids without working or I can raise the kids without working. After 19 years (we got the policies last year) she or I can work again (although we plan to FIRE before 19 years, but we ignored that as a cushion). We have money already set aside for post-secondary education so it wouldn't be used for those purposes.

If you are looking to replace your income even after the kids are older you will probably want a longer policy. If you think you might need the insurance longer, buy longer term now while premiums will be lower at your relatively young age.
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Old 08-16-2010, 11:26 AM   #4
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Part of it needs to determine how long your need for income replacement lasts. For example, if you were planning to retire at 55 and you would have either all private savings or a pension with survivor benefits (and it would be enough), you might not need life insurance past age 55. On the other hand, if the difference in premiums isn't huge you may want to lock in 30 years if you're not sure when the need will end.

Having said that, my experience in pricing term life is that it tends to get rapidly more expensive as the length of the term takes you past age 60. Until part of the term takes you to 60, it seems that increasing the contract length had only a minor impact on premiums, but taking it out past 60 is where the "elbow" in the curve appears.
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Old 08-16-2010, 11:35 AM   #5
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Originally Posted by ziggy29 View Post

Having said that, my experience in pricing term life is that it tends to get rapidly more expensive as the length of the term takes you past age 60. Until part of the term takes you to 60, it seems that increasing the contract length had only a minor impact on premiums, but taking it out past 60 is where the "elbow" in the curve appears.
I can second this with my experience. We looked at a 30 year policy which would have ended when I 66 and DW 64. We figured we could just pay the premiums until we no longer needed in the insurance, but there was a significant difference in annual premiums vs. the 20 year which put the termination age at 56 and 54 respectively, but I don't recall exactly how much of a difference.
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Old 08-16-2010, 11:49 AM   #6
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Depends on the price difference. IIRC, when I was in the term insurance market the difference in rates was substantial.
Ah, yes, just plugged in some numbers to a selectquote for 500K, excellent health, etc. 20 years was $643/yr 30 yr was $1060/yr

You can get a policy and then apply for a "re-entry" rate every 5 years, as long as your health is still good.
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Old 08-16-2010, 07:49 PM   #7
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I went with a 20 year policy starting at age 43. The annual premums are fixed at the same rate for the first ten years at one rate and then step up significantly for the second ten years. The premiums for the first ten years were comparable with variable rate policies for someone at age 43.

I can cancel the policy at any time at no cost and will probably do so once I reach FI - if I have enough to support myself and my family while I am alive, by definition there must be enough to support the family without me once I am gone so it would be a waste of money to continue at that point.

If you can get a policy which is structured in a similar manner to mine (tiered payments and the right to terminate), going with the longer term may offer the benefit of guaranteed coverage if you need it without actually costing you anything if you don't need it and cancel later on.
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Old 08-16-2010, 11:42 PM   #8
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Depends on the price difference. IIRC, when I was in the term insurance market the difference in rates was substantial.
Ah, yes, just plugged in some numbers to a selectquote for 500K, excellent health, etc. 20 years was $643/yr 30 yr was $1060/yr

You can get a policy and then apply for a "re-entry" rate every 5 years, as long as your health is still good.
Applying for a new policy every 5 years will get significantly more expensive at ages 45/50/55/60 than buying a longer term at age 35. If you're in perfect health at age 35, odds are you won't be at age 45, 50, and 55 to still get the best risk class.


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I went with a 20 year policy starting at age 43. The annual premums are fixed at the same rate for the first ten years at one rate and then step up significantly for the second ten years. The premiums for the first ten years were comparable with variable rate policies for someone at age 43.

I can cancel the policy at any time at no cost and will probably do so once I reach FI - if I have enough to support myself and my family while I am alive, by definition there must be enough to support the family without me once I am gone so it would be a waste of money to continue at that point.

If you can get a policy which is structured in a similar manner to mine (tiered payments and the right to terminate), going with the longer term may offer the benefit of guaranteed coverage if you need it without actually costing you anything if you don't need it and cancel later on.
Please tell me it's not a Primerica policy....you should be able to get a guaranteed 20-year term for about the same price as a 20-year policy that only guarantees the first 10 years.
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Old 08-16-2010, 11:55 PM   #9
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This may be a hijack or it may be relevant to the OP's question. It seems to me that life insurance policy questions are often built on a premise that one policy will be purchased.

Why wouldn't someone buy both - a 20-year AND a 30-year policy? If income replacement needs go down after 20 years but don't go away completely until year 30, why not tailor the purchase to the need?

I would understand consolidating under one policy if there are significant discounts when buying a bigger policy, but my impression is that life insurance has a pretty straight premium-to-benefit curve.
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Old 08-16-2010, 11:58 PM   #10
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This may be a hijack or it may be relevant to the OP's question. It seems to me that life insurance policy questions are often built on a premise that one policy will be purchased.

Why wouldn't someone buy both - a 20-year AND a 30-year policy? If income replacement needs go down after 20 years but don't go away completely until year 30, why not tailor the purchase to the need?

I would understand consolidating under one policy if there are significant discounts when buying a bigger policy, but my impression is that life insurance has a pretty straight premium-to-benefit curve.
A lot of people buy a combination of benefits. Some people buy part 20-year and part 30-year, but the majority that do a combination buy either a 20 or 30 year term and then some permanent coverage, either whole life or universal life, as a "safety net" in case they do still need coverage when the term expires. I have a lot of clients that are glad they bought some permanent insurance when they did because of health or life changes that were unexpected, and a lot of other clients who wish they could have done things differently and are paying a very steep price now that they're in their 60's and 70's and still need coverage. The one major factor that people hardly ever consider when it comes to life insurance is how badly a divorce can change their financial picture.
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Old 08-17-2010, 07:45 AM   #11
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My DH is a main breadwinner in our household. I've read that if both spouses work FT, both should be insured. I'm not sure whether it means I gambled or not, but we got 2 life insurances for the DH through 2 different companies. One is for 30 and another for 20 years.
I've got a small life insurance through my employer at no cost.
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Old 08-17-2010, 07:41 PM   #12
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I purchased a 20 year term $500,000 and added a 10 year rider for an additional $500,000 at age 46. There was also a second rider of $200,000 that covered my wife. My children are 17 and 27 so the 10 year rider was while my daughter was in college.

My wife passed away about 8 years ago and the insurance proceeds allowed me to scale back my work so that I could raise my son and get my daughter to finish college. The riders have now expired and i just have the $500k term life for the next 8 years.
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Old 08-17-2010, 08:35 PM   #13
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I'm close to you in age and probably also have kids roughly the same age. I opted for a 25 year term, which seemed to fit my requirement of making sure that the youngest kid had reached adulthood before the term ended.

25 years from now, my assets will be the primary "insurance" that will take care of my family in my absence.
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Old 08-17-2010, 11:04 PM   #14
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I'm close to you in age and probably also have kids roughly the same age. I opted for a 25 year term, which seemed to fit my requirement of making sure that the youngest kid had reached adulthood before the term ended.

25 years from now, my assets will be the primary "insurance" that will take care of my family in my absence.
Many times the 25-year rates are more expensive than 30-year rates because so few companies sell 25-year term policies. Sometimes it works, sometimes it doesn't.
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