People often start their life insurance experience with loan or mortgage insurance – insuring your life but instead of your family or business receiving the proceeds, your bank/lender gets all the money. Alternatively, some people buy term life insurance so their spouse or business partner can decide what needs to be paid off, and what needs to be used for other things such as replacing income. In the case of a business, proceeds can be used for buying out shares and/or paying for someone to do the insured’s job. When you are starting out and money is tight, simple 10 year term makes financial sense.
However, not all term life insurance products can grow with your needs. No one likes the medical exams or the invasive questions needed to qualify for higher coverage amounts and longer terms. However, it is easy to get that stuff over with once, and get the highest coverage you can afford with the shortest term affordable, and do so with a company that gives you the most options going forward – with no future medical underwriting needed.
Some companies will allow you to convert a 10 year term policy to a 20 year term anytime between the first anniversary of your contract, to the fifth. That is a brand new 20 year term period, so the contract you qualified for covers you for almost 25 years before renewing. Add a guaranteed insurability rider and you can increase coverage over that period as well – and no more medicals needed to do so.
It only costs a bit more to make sure that a contract is renewable and convertible but it’s worth the money. With a renewable clause the insurance company must continue your coverage until all of the renewable years are done, allowing you to maintain coverage should you have a health event (cancer, heart attack) that makes you uninsurable. It may be less expensive to replace the insurance upon renewal if you are healthy, but the renewal could be less expensive if you acquire health issues such as diabetes and/or hypertension.
Most importantly is to ensure the term insurance you buy can be converted, in full or part, to a permanent product that is structured to grow with lifestyle and estate needs. Contract wording varies greatly, so ensure your options include cash values that can be accessed without surrendering the policy, and a death benefit that grows over time.
If we all knew the road our lives would take we might not need insurance past the income earning years. With all the advances in medicine and health sciences, the future is an unknown, but your financial well-being can be planned for. Life Insurance is not a temporary need, but a temporary product such as term insurance with appropriate renewal and conversion options, can ensure your coverage grows easily with your need for financial protection.
You may even have something already in place that can be converted without medical underwriting.