Most of us agree when thinking about a purchase like life insurance; it’s a difficult (and super boring) topic.
We all like to believe we’ll live forever. However, it remains a practical and smart purchase to make, especially when you are younger.
So, how will a 30 year term life insurance policy fit into your financial plan?
Or, a better question is.. should it?
First, What Is Term Life Insurance?
Term life insurance is just what the name implies: insurance which runs for a set period.
In this case, it is a policy which runs for up to 30 years. However, other terms exist too. You’ll find term life insurance for periods of anywhere from 1 to 40 years. You may think a policy lasting this long must be outrageously expensive.
In reality, they are affordable and easy to purchase.
Depending on your specific policy, you’ll pay your premium either monthly, quarterly, or annually through the terms of the contract.
Most policies will automatically renew, so you needn’t worry about losing your coverage once the term is finished, but prices go up fast. This fact alone makes a 30-year term life insurance policy a worthwhile investment.
Some Quick Sample Rates
Before we get much further, let’s take a look at what rates might look like, just so you get an idea of how they are different from, say, a 20-year policy. Here are some sample rates for a 30-year term life insurance policy with a $500,000 death benefit:
*rates are based on a male, aged 38, who is tobacco free and in great health.
You’ll notice two things, right off the bat. Just because one is lower in annual price, it might actually be slightly more costly than another if you choose monthly payments.
So, before you go picking a product and company, you may want to take a moment to think how you’re going to pay for the policy so you save as much as possible.
For more sample rates by age, gender or other factors, click here.
The Real Benefits of 30 Year Term Insurance Policies
When you buy term life insurance, you are locking in your premium rate for this initial policy period. This means your rates won’t go up during the term you purchase. You have a set payment for which you can budget, as long as you keep the policy. With these times of rising costs is a huge advantage.
Once your policy renews, your premium will change. Generally, the younger you are, the better lower insurance rate. The rate women pay is also lower simply because of the differences in lifespan. This is what makes a 30-year term life insurance policy an excellent investment of individuals under 45-year-old.
Another benefit for life insurance in general is the tax-free death benefit. Your family will not have to pay taxes on an insurance payout. Your premiums in a term life insurance policy will benefit those you love and support. With a 30-year term, you can get it and forget it. It’ll be one less thing to worry about when it comes to your family’s future.
Taking Care of Your Family
Having a life insurance policy, no matter what the term, makes sense because it will take care of your family in the event of your unexpected passing. As uncomfortable as the topic is, it’s essential to consider it from a practical point-of-view.
Your surviving family will likely have new short-term expenses. There is also the loss of your income to the household.
A 30-year term life insurance policy can also help your family with the long-term expenses they’ll likely face. These may include things like an unpaid mortgage and college tuition for your children.
Think of it as a way to protect them even if you’re not there. It is an investment in their future and a legacy of your role as a spouse and parent.
For you, it is peace of mind.
The Amount of Coverage You Need
In addition to the term, you can also select different amounts of coverage. Your premium will vary, of course, with the amount of coverage you choose. Many people choose to get life insurance as income replacement in the loss of a spouse.
This is where you can begin when it comes to deciding the coverage you should get.
You should also consider other long-term costs such as a mortgage or college expenses.
Remember, the purpose of life insurance is to take care of your family for the long-term. To calculate the amount of coverage you need, begin with an estimate of what your family needs for an annual income.
This figure will roughly come out to about 4 percent of the amount you need.
Next, take the figure and multiply it by 10. This calculation will give you the approximate coverage you need for your 30-year term life insurance policy.
For example, let’s say you want to ensure your spouse received an annual income of $50,000. Multiplied by 10 means an insurance policy with a total coverage of $500,000.
This may seem like an enormous figure, but remember this is spread out over the course of 25 years to cover the lifespan of your surviving spouse. You can adjust this figure based on your savings and investments to get a more realistic number.
As you probably can see the investment in a 30-year term is making more sense now when putting it into context. And while the subject may be painful, it is essential to be practical.
You should also review your insurance needs periodically, especially after major changes like purchasing a home.
How to Buy a 30 Year Term Life Insurance Policy
Let’s turn now to practical matters. Thirty years, of course, is a long time.
And if the policy pays out in one year or at the end of the term, you’ll want to ensure your family will indeed benefit. This is why it makes sense to purchase a policy from a reputable company who has been in the business for some time.
You can use independent ratings for financial strength from analysts of the industry such as A.M. Best and Standard and Poor’s. You should stick with companies who are considered financially stable and strong.
If it means paying more for a policy, it is may be worth it in the long run. It won’t do your family any good if it isn’t there when they need it most.
You should also make sure to choose a policy which can automatically renew.
This feature is essential to ensure continual coverage in the event of a terminal illness. Getting insurance when you’re younger is easier than it is for an older individual with a pre-existing condition. You’ll find many companies are very generous in this regard, insuring people to age 80 or older.
Get Affordable Protection for the Future
Buying a 30-year term life insurance policy now is an excellent choice especially if you’re younger or just starting out. Premiums have come down in recent years, making it a more affordable option.
And remember, when you buy a 30-year term policy, the premium is locked for the entire term of your initial policy period.
When you initially apply for life insurance, you may need to get a physical exam. Your agent will also discuss your present situation including your family history of health conditions and common causes of death such as cancer and heart disease.
Rest assured this part of the process is routine. The insurance company is only trying to assess their risk as well.
Your agent may also ask you about the risks associated with your job or any pastimes you participate in regularly such as rock climbing. Again, these factor into the risk the company takes with a policy. Depending on your recreational activities, you may need further assessment before a policy is issued.
However, if you want, you can skip the medical and get up to a million dollars in coverage, or, in some cases, more.
Buying a 30-year term life insurance policy is a wise investment for a younger individual starting out in life. It is a way to ensure your family has a financially secure future no matter what fate may bring into your life. It is affordable and easy to buy.
And with a 30-year policy, you can secure a cost-effective rate through its entire term with no increases in your premium cost.