I am interested in increasing my term-life insurance coverage, and creating a policy for my wife. We are both 35 years old. I am looking at policies that offer locked-in rates for 10, 15 and 20 years. Obviously, the shorter the duration, the lower the rate. We have a 1-year-old son. I can see that having the life insurance rates jump when he is 10 or 15 years old (prior to college) is probably not good for our budget. So is it best to look at the policies that lock in the same rates for 20 years or more?
You're right on target. It's essential to match the term of your life-insurance policy to the amount of time that you need the coverage. If you want insurance until your son starts college, for example, then look for a policy that locks in its rate for at least 20 years.
Interestingly, the longer-term policies don't tend to cost much more than the shorter-term versions. A healthy 35-year-old man, for example, could pay less than $300 per year for a $500,000 policy that locks in that rate for 20 years, $260 for a 15-year policy, or $220 for a 10-year policy. Saving less than $100 each year isn't worth the extra risk: After the 10 years are up, for example, the $220 rate could jump as high as $3,200 in year 11. Since your son is only one right now, you'll want to continue your insurance coverage after that term is up. If you're still healthy, you could shop around for another term policy at that time (although the price will be based on your older age), but it's much better to pay a little extra now to avoid that risk.
A few companies also offer 30-year term policies, which cost a lot more than 20-year versions but may be worthwhile if you know you'll need insurance for more than 20 years (if, for example, you plan on having more children and want to have coverage until they're all finished with college or if you want a policy to match the length of a 30-year mortgage). The 35-year-old man in the example above would pay about $570 for a 30-year term policy.
When you're ready to start shopping, first check out our life insurance needs calculator to make sure you're buying enough insurance, and our other life insurance stories for additional advice. Then go online to compare rates for several companies at InsWeb and Quotesmith or Accuquote. If your health is not so good, call AccuQuote at (800) 442-9899 for more personalized attention.
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