Term Life Insurance is probably the most popular life insurance policy in the marketplace today, especially if you are a young adult and need a considerable amount of coverage. When we buy life insurance, whether it’s term life insurance (temporary) or universal life and whole life (permanent), the most important thing to consider is “why do you need this policy”
The “why” question is very important because different kinds of policies can be used for different reasons:
- Mortgage Protection Insurance – Term works perfectly for this coverage because you can purchase the proper term length and amount to match the mortgage on your home.
- Final Expense Insurance – Most policies are offered using whole life insurance because you can purchase a policy with a lower face amount and the coverage can last forever.
- Income Replacement – Term is typically the best solution for income replacement because you can purchase a large face amount at very affordable rates.
- Life Insurance with a Savings Component – A consumer who is looking for life insurance but with a savings component attached will typically use a Universal Life product since it offers permanent insurance protection combined with an interest-earning cash value account.
If you are looking to purchase affordable life insurance for income replacement purposes or to use as mortgage protection insurance or simply because you want the cheapest life insurance possible, 30-year term life insurance will be a perfect solution.
As we go further in this article, we’ll discuss the pros and cons of 30-year term life insurance and how to get the best rates possible.
The Advantages of 30-Year Term Life Insurance
- Certainly, the first advantage we’ll list for the 30-year term policy is that it lasts for 30 years. This means that once your policy is issued, your payments will remain level until the end of the term.
- For consumers who are looking to pay off a home mortgage in the event of their death, the 30-year term life insurance policy matches up perfectly with a 30-year mortgage.
- A 30-year term life insurance policy can provide an income replacement benefit that is more realistic when you consider that it will likely take more than 20 years to substantially reduce the debt you are insuring for.
- Most 30-year term life insurance policies are convertible. This means that you can convert all or some of the death benefit to a permanent policy that will last a lifetime without having to prove that you are still healthy.
- Most insurance companies will offer a renewal when the policy expires. This means that if you decide to keep your life insurance coverage, you can renew the policy on an annual basis as long as you are willing and can afford the pay the higher premium each year.
The Disadvantages of 30-Year Term Life Insurance
As with any life insurance product, there are sometimes disadvantages if you select the wrong product, This doesn’t mean there is something wrong with the life insurance product but, rather it is simply not the best choice for your individual circumstances. Here’s when a 30-year term policy is not the best choice:
- You are looking for the cheapest life insurance premium possible. Since term insurance rates are the average of the insurance cost over the life (term) of the policy, a 10, 15, or 20-year term policy will be cheaper than a 30-year term.
- If you are totally sure that you’ll pay down your debt and pay off your mortgage within 20 years, you’ll save money by purchasing 20-year term life insurance rather than 30-year term life insurance.
- If you are purchasing insurance that will include the cost of your children’s’ education, if they are likely to enter college in 20 years or less, then a 30-year term policy is likely unnecessary and more expensive.
You need to remember that term life insurance is very inexpensive because most people do not keep a policy for the entire term they purchased it for and most people simply outlive the term of the policy. If you are not completely sure that you will need your term insurance for 30 years, it may make more sense to purchase a 20-year term life insurance policy and save the additional premium.
What is the Rate Difference between 10, 20, and 30-year Term Life Insurance?
As we mentioned earlier in this article, there is a significant difference in rates when you compare the various policy terms for term life insurance.Here, we’ll list the rates for our most competitive 30-year term life insurance policies. These are actual rates for a $1 million policy for a healthy male and female non-smoker:
As you will notice on the chart above, a 30-year term life insurance policy costs substantially more than a 10-year term policy and over 70% more than a 20-year term life insurance policy.
Here are actual rates for a $500,000 dollar 30-year term life insurance policy for different age groups:
Age of Applicant
It’s apparent from the rates listed above, 30-year term life insurance gets to be fairly expensive once we become 45 years old so the lesson here is to purchase your life insurance early in life.
It’s important to consider why you need life insurance so that you can select the best product with the most affordable rate. Here is when your independent insurance agency is most helpful because independent agents represent multiple term life insurance companies and will shop your business and then deliver the most effective solution possible.