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Term life insurance
Combine Policies

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Combing Term Life Policies

Big changes require policy reviews

Term life insurance is a product that most people choose to evaluate in a few steps.  We can see this by the ages at which people generally apply for term life coverage.  There tends to be a general range of term life applicants in their 30�s and another range of applicants in their 50�s.  This isn�t to say that you don�t have lots of application before, between, and after but these are the two common age bands.   This isn�t to hard to understand as these age bands also match up with huge life changes. 

In the 30�s you generally have new families, marriages, babies, mortgages, and businesses.  This directly translate into a need for life insurance and since term life rates are the most affordable to a person just starting new families, this makes perfect sense.  Later in your 50�s, you have generally raised children who are now adults and you�re more looking at term life insurance to cover a spouse, mortgage, or business.  50 is still really young (especially these days) but you are starting to think about leaving something to your loved ones or taking care of them in case something happens.  Let�s just say you�re more responsible in your 50�s (hopefully).  So we have these two different periods with different needs and situation but a common need for life insurance protection.  This is where the question of combing term life insurance policies come into play.

Usually, when you�re in your 30�s, extra cashflow is not easy to come by.  There are so many constraints on your income already with new babies, mortgages, etc.  With this in focus, most young adults will buy a certain amount of term life coverage.  Let�s say that $500K would be ideal.  The young adult may choose to buy $250K of term life to keep his costs down but still get some amount of coverage.  We can definitely understand this and ultimately, any amount of coverage is better than none.  Eventually, the same person may find that finances are better as they move forward in their professional life and with their financial obligations increasing, they want to look at adding additional life insurance.  What�s the best way to do this?

Continuing with our example above where the person has $250K, it�s a question of quoting the various options.  Let�s assume we want to go to a total $500K and 10 years has passed by.  First, we take the amount of the existing policies monthly premium.  We then quote a new policy at $250K and a separate quote of the full $500K.   We now have to two basic rates.  The combined policy rate of our existing term life policy and the new $250 against the full $500K policy.  Which will be cheaper?  It depends.  The combined policy set-up should be cheaper since the original $250K was bought 10 years earlier and when you the applicant was 10 years younger.  There may be savings however with the $500K since that�s a bigger price break and tends to be cheaper per $1000 of term life coverage.  The only way is run the term life quote and check.  The actual rate is part of the equation of a combined policy.  What about the total length of coverage.  You�ve used up a part of the original plan�s term already.  You might �extend� the benefits with new coverage of either the $250K partial policy or the full $500K which can be advantageous.




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