April 21st, 2008 | 
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DrewS asked:
I’m 20 years old, married, no kids. I want to take out a term life insurance plan. (I probably will need it for about 30 years) My question is, should I take out a 30 year plan, so I will be paying the same rates in 30 years? Or should I take out a shorter one, paying less, than purchase another one in 10 or 20 years? I’ve heard speculation that rates will be lower when I’m 40 because life expectancy will be longer. What do you guys think? I’m in good health and don’t have a bad medical family history. Thanks!!
I do have a wife
Ian Dildine
I’m 20 years old, married, no kids. I want to take out a term life insurance plan. (I probably will need it for about 30 years) My question is, should I take out a 30 year plan, so I will be paying the same rates in 30 years? Or should I take out a shorter one, paying less, than purchase another one in 10 or 20 years? I’ve heard speculation that rates will be lower when I’m 40 because life expectancy will be longer. What do you guys think? I’m in good health and don’t have a bad medical family history. Thanks!!
I do have a wife
Ian Dildine
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If you dont have kids or a wife depending on your income you need very little or no life insurance. The only reason to carry life insurance before you have a family is to pay for your funeral.
Insurance will never be cheaper for you than it is today. Buy the 30 year. You should have insurance to last till your youngest child is out of college, that is when your practical fiancial obligation as a bread winner is over. The theory being, by then you should have enough savings to take care of wife in retirment.
If you buy a 10 year policy, say it expires in 10 years when you have 2 young children and a big mortgage. You go to buy another 20 year policy but find yourself uninsurable for any reason (health, meds, lifestyle, etc.). Buying the 30 year policy insures your insurability. Dont go crazy with the face amount, 500K should be the max, and should be cheap as hell if you are in great health. Watch your booze and food intake for the week before the paramed exam, your diet has a big impact on the blood results.
The point of term insurance is to cover expected expenses after death like a mortgage, college for your kids and things like that. It might be a good idea to start a 30 year term policy if you expect to have kids and a family some day. The benefit would be you have locked in a rate before you have any medical issues (these can start when you are 30 or 40). One thing to think about though is will it really matter to do this now or in 5- 10 years? Do you have any debt or student loans right now? Pay these down or off first. Do you already have a 401K with a company match? Do you have any nest egg at all? Do you have any savings for retirement? The reason I lay those things out, is the likelihood of you dying within the next ten years is pretty slim unless you’re an adrenaline junky. Putting money away into a Roth IRA and a 401K gives you more longterm reward. Starting at 20 you have the rule of compound interest that makes your money grow faster. And it’s a good habit to get into. If you already have these and do not have a lot of debt than go for the term policy. One thing you can look for also is a policy that has a rollover for what you have put into it if it is not used.
If I had things to do over again, that would be how I did it.
There are other questions I would need to ask you, but based on the info above I would recommend 30 year level term, one policy that covers both you and your wife. Um, sorry I just assumed that your wife, also, worked. Does she? Are you planning on having kids?
Why are you thinking about insurance now? Has something changed to make you feel that you need insurance?
You should get a full financial check up with whatever agent you go with. This check up should include every aspect of your financial life- paychecks, taxes, 401ks, when you want to retire, how much do you want to retire on, etc. You need to know your debt freedom date AND your financial independence number. The FIN is how mauch money you need to save so you can retire and livea lifestyle that you are accustomed to, now.
This will find exactly how much protection you need. Anyone who asks how much you want or how much you can afford- RUNfrom them!!! They are only helping themselves, not you. They have asked nothing that pertains to your situation. Ihave protection on my family, but my needs are different than yours. This checkup takes that into account.
Need more info, email me.
I’d do the 30 year. At your age, the difference between 20 to 30 is not going to be huge. And like you said, you can check back in 10 years and see if rates have gone down, if they have cancel and get another policy.
But if you get fat or develop some medical condition, you’ll have a 30 year policy from back in the day when you were young and strapped.
I would tend to lean towards the 30 year policy, but it’s hard to say for sure without knowing more about you and your plans. Life expectancies will probably go up lowering rates, but the current trend is for higher reserve requirements which increases rates. No one can say for sure, but you should look around every so often to make sure your coverage matches your goals. Make sure your policy is convertible so that your insurability is protected regardless of the duration.
We went for the thirty. It costs more but at least it guarantees your insurability for 30 years.
I’m sure you know this… but;
Stay away from any “Whole Life Policy” and stay away from variable annuities. Two high commission products that are almost always sold to the wrong people.
The 30 year term would be a good choice for you at this particular stage of your life. Your logic is somewhat sound, except that we don’t know what the future holds, hence the need for insurance. We have no guarantees that you will be insurable in 10-20 years, so whether or not the life expectancy of the general population goes up, you’re still in a pinch.
If the rates are cheaper, and you are still insurable, re-apply. There’s no rule that says you can’t. By getting the 30 year term, you’re guaranteeing your rate for 30 years, and you can always switch should the need arise.
In general, I always say buy the longest term policy you can, and be sure it’s renewable and convertable.
But what’s the GOAL? Keeping the wife financially secure? BE SURE YOU HAVE A GOAL before you buy.
I have worked in the insurance industry for 15 years but I am not an agent. (No sales motivation here) I would agree with most of the answers that the 30 year is the best term. The reason being the younger you are = the cheaper the rate of the total cost of the policy. For example if you stick with a guaranteed rate at the age of 20, you will pay less than any other combination over time (10 year term now + 20 year term when you are 30 > 30 year term when you are 20). This ratio seems to always hold true. If not, you are probably getting ripped off. Also, look for a return of premium option on your term coverage. This is a newer feature to term life policies but it means you get your premium money back at the end of the 30 year term if you outlive it.
You will probably receive a Group Life Policy through an employer benefit package during sometime in your life. However, these types of plans are rarely portable (move with you if when you change employers). So it is good to lock in a rate now.
Hope this helps, good luck.
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