Understanding Life Insurance Laddering

Life insurance coverage is vital at every age, but because the needs of a family change with time, so do our life insurance needs change. Usually, younger people have fewer obligations, and they need less coverage. The same applies to older people. However, during our most productive years, the coverage needed is usually much more because we have mortgages on homes and need to meet the needs of a growing family.

Ensuring the right coverage throughout your life can be tricky. It can also prove very expensive without a strategy. The solution is known as insurance laddering and this ensures you have the correct coverage in place for all your specific needs at every period of your life. Most importantly, it ensures you only pay for the coverage you need at any given time.

Understanding insurance laddering

A well-structured insurance laddering strategy can save you lots of money on insurance premiums, but how does it work?

It works by buying a life insurance policy with different durations and different coverage amounts. These do not all expire at once but are created to expire at different periods meeting your specific needs during a pre-set timeframe.

There are two ways this strategy can be followed. One is to have one life insurance policy with added term riders. On the base policy, there are stipulations about the terms and coverage amounts.

The second way is to simultaneously purchase separate life insurance policies for each period you want to insure. Each policy is planned to cover your needs at that specific time.

One example of how insurance laddering is done:

• One 10-year policy to cover your mortgage on a newly purchased home or your student loan
• One 20-year policy to ensure your children’s needs are met as they go to school, complete their studies, and start earning an income
• One 30-year policy to cover the repayment of your mortgage

Both strategies will save you money on premiums, and a base policy with term life riders is optimal.

How do you save money with insurance laddering?

By buying the bulk of your coverage when you are young, you get far more favourable rates than if you wait to purchase insurance coverage when you are older. Your coverage is timed to decrease as your debts decrease, and as each period on your life insurance terminates, the premiums for it stop.

You are also purchasing multiple policies or a base policy with a rider, and most insurance companies offer discount prices for both.

Laddering has the advantage of allowing you to combine a base permanent life insurance with term life coverage, so you can feel secure at every stage of your life.

Who does insurance laddering work for?

Insurance laddering is essential for people with increased obligations, but that know these will decrease with time. These obligations include a home mortgage, debts, and the support and education of dependents. Insurance laddering can also be valuable for people with pre-existing health conditions or dangerous hobbies because it is cheaper.

Those that don’t need insurance laddering are young people without any liabilities or dependents because their needs can usually be covered with a simple term life insurance policy. Also, those planning to leave their family some money through their life insurance, are better off opting for permanent life insurance.

Are there any drawbacks to insurance laddering?

Single term life policies are easier to understand and structure, but insurance laddering allows for more personalization. These are the three drawbacks of insurance laddering:

Single term life policies are easier to understand and structure, but insurance laddering allows for more personalization. These are the three drawbacks of insurance laddering:

1.     More confusing and difficult to manage

You deal with a base policy to which you add term riders. Each has a different premium, amount of coverage, and terms. Once each of the riders in the policy expires, you must make sure it is not renewed automatically. In a few words, you need to manage your policy well or have someone manage it for you.

2.     Decreased coverage

With insurance laddering, your premiums decrease over time, but so does your coverage. Taking inflation into consideration, an amount you thought was substantial in 2020, might not be enough to sustain your intended beneficiaries twenty years later.

3.     You can’t predict your future needs

What you have planned for your future now, may change later. If you decide that you need extra coverage later, your premiums will increase considerably because you are older. However, careful planning should help you avoid this problem, and insurance needs do decrease for most people with time.

Life insurance is valuable to your family, even as you get older. It is best to speak to an insurance broker for the best advice on how to get the best rates and terms for your situation. At the age of 50, you can still secure affordable premiums and coverage that suit your needs.

Contact our expert advisers today and find out which is the best life insurance for you. Our life insurance advisors will provide you with quotations and the most suitable policy types.

The process of purchasing life insurance from Apluswealth is designed to be super easy, online, and fast. If you know what type and amount of coverage you are looking to get, simply get your quote using our software and then click apply online. However, if you require assistance from our expert advisors, we will set up an online or in-person meeting with you to go over your needs analysis and assist you with you making your decision.

Depending on the amount of coverage and the life insurance provider you have chosen, you may or may not be required to complete a medical examination. Once the medical examination and the underwriting process are completed, you will be offered your insurance coverage and the process is completed. Start covering your family from today.

Email: Contact@apluswealth.com

Tel: 1-888-461-6120