Benjamin Franklin famously wrote in a 1789 letter, “In this world, nothing can be said to be certain, except death and taxes.” If we know this, should we guarantee a life insurance benefit at our youngest and healthiest age? This may be the million-dollar question.
Let’s take a deeper dive strictly from a death benefit play and examine term vs. permanent insurance premiums on a current 30-year-old to his life expectancy of age 85
Guaranteed universal life policy at top health rates:
- $500 a month
- Buys $1,529,413 death benefit
- Over the next 55 years a total of $330,000 funded into the policy
Let’s take the same client, though in this situation he only wants 20-year term – He is looking for the same death benefit of $1,529,413
30 years old purchases a 20 year term at top health rates:
- $52/mo.
- Over twenty years, premiums total $12,480
At 50 years old he purchases another 20 year term at Preferred health rates:
- $264/mo.
- Over twenty years, premiums total $63,360
At 70 years old he purchases his last 20 year term at Standard health rates:
- $4006/mo.
- Over fifteen years, premiums total $721,080
Term life insurance policies serve a very important purpose. It provides coverage for a limited period of time and is the most affordable type of insurance when initially purchased. Though, if one is to live to life expectancy it can be far more expensive.
It is common to think about term vs. perm as an either/or decision, it may be more appropriate to think of both. Especially if one believes there will always be a need for life insurance.
Contact your life insurance specialist if you think a combination is right for your client.