Times are changing swiftly, and families are constantly evolving as a result. For example, the estimated age of first-time mothers continues to be on the rise since the early 1980s. Also, most Americans have less than a thousand dollars in their savings accounts. These startling statistics suggest that more individuals in their 50s today still have children who are financially dependent on them. The vast majority of these people in their 50s know they won’t have enough cash to support their families financially if they are laid off, fired, experience an illness, accident, or if their life partner passes. If you are 50-years-old and any of these examples sound similar to what you are experiencing, then purchasing some life insurance could be a wise choice that will offer your family the necessary support in case of any unexpected financial stress.
Life insurance policies allow you to have a contract with an insurance company that can provide your loved ones with financial support if anything happens to you. With a life insurance policy, you’ll pay a monthly or annual premium. Suppose you pass away while the contract is active. In that case, the life insurance provider will give your family a death benefit from a policy payout to your designated beneficiary (or beneficiaries). If you pass away unexpectedly, your beneficiaries can apply the death benefit to cover any financial expenses to remain secure.
Unfortunately, if you are fifty, you’ll need to know that the older you get, the more your life insurance will cost. That’s the way life insurance policies operate nowadays. If you want some assurance that your loved ones will be financially supported if anything happens to you, you can get that with a life insurance policy. Still, you’ll need to assess the different types of coverage to make sure you get what you need without paying for something you don’t.
What is Term Life? How Does it Work?
Term life insurance differences from whole life insurance and the debate about which is better have been going on for decades with supporters on both sides of the argument. Below we’ll give you the fundamental breakdown regarding the variations between whole life insurance and term life insurance.
Term policies differ from whole life policies because term life policies cover an individual’s life for a set number of years. Whole life policies, on the other hand, cover a person for the duration of the lifetime. A term life policy gives you life insurance protection for a certain period. Most policies cover twenty or thirty years. The goal of term life insurance is to ensure that your loved ones are financially protected during those particular years. If you passed away while your term life insurance policy was still effective, then your beneficiary would still get the entire policy amount upon your death.
Still, a term life policy will only last for the set duration. That means once the term life coverage length is over, you have the option to renew it and continue or select a different strategy. Your life insurance policy’s rates will be based on how old you are with a term life policy. So, once you reach the end of your term, the life insurance premium will increase, meaning it will cost you much more since you aged during the policy duration. Hopefully, you’ll be at the point where you won’t need to renew it and instead started an excellent savings and investment portfolio. If your children are no longer dependent on you, it might be time to consider an alternative strategy.
A whole life insurance policy, also called a permanent policy, lasts as long as you live and comes with an additional cash value component that can increase your wealth as you pay into your policy. However, a whole life policy isn’t nearly as affordable monthly as a term life policy, meaning you may pay as much as ten times more than what you pay for your term policy. The benefit of a whole life policy is that it will last as long as you live, and its cash value component can grow a lot as time passes. Still, whole life policies can be very complex, so if you decide to purchase one, it’s best to work with a financial expert to help you purchase and keep your policy active.
If you’ve reached the age of fifty, then term life insurance would be your better coverage option if you are worried about affordability. For example, a term life policy for a fifty-year-old male that was fifteen years long and gave $250,000 of coverage would cost around $50 monthly as long as that man was in great health, for many people, that gives enough time for children to move out of the home or for a person’s spouse to retire. In contrast, 15-year whole life insurance or guaranteed life insurance policy that would last one’s lifetime for that same male would cost around $500 monthly. Thus, the prices of the policies are drastically different, and much of this is based on age.
If you decide to opt for a term-life policy, then you’ll have to figure out the length of time you want your coverage. Most fifty-year-old people apply for term life insurance pick ten, fifteen, or twenty, or thirty-year term policies. Let’s say the same fifty-year-old man in our above example decided to opt for a twenty-year term length instead. If that were the case, the insurance would cost about $60 per month for a twenty-year duration. Increasing that duration to thirty years makes the coverage significantly more expensive for that same man, increasing the rate to as much as $100 monthly.
Since life insurance premiums increase once a person reaches fifty, you need to ensure you get the coverage you need. If you don’t have enough, you’ll wind up wishing you got a longer policy. On the other hand, paying for too much coverage can cost you the money you could have used for retirement or savings. So, you’ll need to consider if you really need the full thirty years, or if you’ll be just fine with twenty, which is the more popular option for people purchasing term life insurance once they reach fifty.
How Much Life Insurance Coverage Should I Purchase?
Assessing how much life insurance coverage you need means you should consider your debts and any other obligations you want to cover for your family in case of your death. For example, if you are worried about ensuring your income is replaced and keeping your family in the home you’ve mortgaged, then you’ll need to factor that amount into your coverage. So, much of this will depend on where you live as well.
You’ll need to consider the cost of living in your area as well. For example, if you live in New York City, your mortgage, rent, and cost of living will be much higher than if you lived in South Carolina. So, if you want to make sure all of that is covered, you’ll need to factor that in.
The typical amount of life insurance purchased ranges between $100,000 to $500,000, depending on where a person lives. The most common purchase for individuals worried about mortgages and replacing incomes would be between $250,000 to $500,000. Of course, how much life insurance you can afford to purchase and pay for monthly is something else you’ll need to consider. So, we’ll talk about some pricing and rates below.
GUL Insurance Vs. Term Life Insurance
With term life insurance, you’ll get a guaranteed amount of death benefits and premiums based on the length of your term—whether it’s fifteen, twenty, or thirty years. For instance, if you opt for a term life insurance plan that lasts twenty or thirty years, the premiums are guaranteed for that amount of time. By comparison, a guarantee universal life insurance (GUL) option would last until whatever age you set. That means with a GUL policy; you can keep your coverage and pay the same amount, even if you live a very long life.
Thus, unlike a term life insurance policy, which only lasts a designated time and costs much more to continue, with a GUL, you can design your premium so that you keep paying the same amount, no matter how old you get. While GUL is an excellent option, it costs much more than term insurance does.
If you are considering a GUL insurance option, then a universal life insurance company can choose different plans or help you design your plan structure. Since these plans can be confusing, it’s best to consult with a financial expert for full comprehension.
GUL insurance is cheaper than purchasing whole life insurance. Whole life insurance has one benefit over a GUL policy; while a GUL policy is affordable, a whole life policy means you can designate your policy to accumulate an extra cash value within the policy itself. That means if you have additional money, you’ll have the option to over-fund the cash in the account. Over-funding your life insurance is an excellent way to save since you’ll get more flexibility and freedom with how you can use that money as time progresses.
Another beneficial factor of a whole life policy is that you’ll get a guaranteed interest rate that’s typically higher than what you’ll get in interest from a bank savings account. That explains why many people opt for these policies to invest their savings into for future financial freedom. For example, most whole life plans will give you an interest rate of at least two or three percent, which is the minimum amount and the worst-case scenario. Many whole life policies pay even higher interest rates than this. Many policies come with a current interest rate amount tacked onto them which is usually a lot higher than the percentages we’ve provided. If the investment options in the life insurance policy wind up becoming successful, the policy’s cash value will substantially increase beyond the initial projected rates.
Another benefit of a whole life policy is that when you are short on cash and you’ve already paid a bit into your life insurance policy, you can skip a premium payment when you get tight. Or, you may be able to pay a lower amount than the usual premium. You can also pay the policy up to a particular age so that you know you’ll have coverage for some time. If you wind up building up a lot of cash in your policy, you can withdraw from the policy or even borrow money against it. So, there’s a lot of flexibility with these plans.
GUL life insurance plans come with a no-lapse guarantee, meaning the insurance company can never change the price of its premiums for the duration of your contract. With type of life insurance policy, even if investments wind up draining out the policy’s cash value, the death benefit still stays as long as you continue to pay your premiums each month.
20 Year Vs. 30 Year Terms
If you don’t want to opt for a GUL life insurance policy because you are worried about what it might cost you now that you are fifty, don’t worry. If you’d rather pick something out that meets your needs for the next couple of decades, then you can opt for a term-life policy.
Several things impact the price of a thirty-year term rate, including health, age, and policy duration. Still, a thirty-year term life insurance policy will cost you more than a twenty-year because the longer the term, the higher the chances that the insurance company will have to pay out on your death benefit.
Most people that opt for thirty-year term policies are young professionals with young children they seek to protect. That’s because people in their thirty and forties also get lower premiums on term life insurance because of their lower ages. Unfortunately, as we mentioned above, the price for a thirty-year term life insurance policy is much higher at age fifty than the twenty-year option.
On the other hand, a twenty-year term length is a very popular choice for age fifty and up. Twenty years provides ample time to support children financially or until one’s spouse is ready for retirement. Also, opting for a twenty-year policy will let you save a little money monthly since this policy costs about $60 a month compared to the $100 plus a month you’d pay with a thirty-year.
If you are worried about affordability, then opting for a twenty-year term policy would be wise. Not only is it cheap, but you pay far more on a thirty-year policy than you payout on a twenty-year term policy. As you get older, the twenty-year term policy price spread may even seem more inspiring to you.
Before selecting any life insurance plan, make sure you shop around. Shopping around can help you ensure that you get the life insurance plan you need at the best rates. There are plenty of life insurance companies out there, so you can work with an expert to find the best rates for your needs.
Work With Us
If you’re ready to pick your life insurance plan and check out your options, consider working with us! We are independent agents that shop around with different companies to get you the best rates at no extra cost. Contact us today, and we can get the best options to you quickly!