Is laddering term life coverage something you should consider?
Updated: Sep 14, 2020
I came upon this insurance concept recently and it really intrigued me. The idea is to stack multiple, smaller term life policies that have various term periods which expire at different times.
Benefits of laddering term coverage
As you reduce your debt and build your wealth, your need for coverage may diminish over time. Laddering (or stacking) coverage allows you to tailor multiple policies to maximize coverage when you need it the most, then gradually reduce coverage – and therefore cost – over time.
Consider Linda who is 30 years of age. She assessed that she currently needs $3 million dollars in coverage to protect her young family in the event of a sudden loss of her life. As time moves forward, her wealth increases and her debts decrease. So, 10 years from now, she may not need the entire $3 million-dollar policy she is currently considering. Therefore, instead of purchasing one policy, she elects to stack her coverage into three separate policies each at $1 million dollars each.
The first one is a 10-year rate lock for $1 million, the second is a 20-year rate lock for $1 million, and the third is a 30-year rate lock for $1 million. This allows her and her family to be covered for the first ten years at $3 million, years 11-20 at $2 million, and the last 10 years at $1 million dollars. This allows her benefits to go down as her assets go up.
Having coverage that changes as she does allows her to save some money too, because as each term policy expires her premium cost will decrease.
Remember the true benefit of life insurance
Always remember that term life insurance is simply there to provide a death benefit which your savings account cannot yet provide. Stacking your coverage is a concept that I would defiantly consider when purchasing a term policy.
Talk with our insurance professionals today in order to learn more about stacking coverage and how it might work for you.