Lifetime Term Life Insurance

  • Oct-23-2015
  • Richard Reich

Term life insurance typically comes in 10, 15, 20, 25 and 30 year terms. The term is the length of time the policy will be in effect. At the end of the term, you can either renew the policy on an annual basis, which is usually cost-prohibitive, or you can purchase a new policy, provided you’re still young enough and healthy enough.

What if you have a need for life insurance after the end of the term period? This is a dilemma a lot of buyers of term life insurance face. If you are 30 years older at the end of the term of your term policy, the premiums for a new policy are going to be much more expensive, even if you are in the same health class you were in when you purchased your first policy (which is rare). Keeping the existing policy in force on an annual basis (with premium increases annually) is usually not the best way to go, as the renewal premiums are, in most cases, going to be much higher than you paid during the policy term.

You can always purchase a permanent policy, either whole life or universal life insurance, which will last your lifetime. However, if you purchased a term policy and, sometime during the term period, you decide you need something more permanent, you can, in most cases, convert your term policy to a universal life policy.

If you are considering purchasing a life insurance policy now and you feel that you have a need for lifetime protection, you should look into permanent policies, either whole life or universal life. They are both permanent policies, but with these differences:

Whole life insurance guarantees the death benefit for life, guarantees the cash value and guarantees the premium.

Universal life insurance assumes an interest rate and the cost of insurance and calculates a projected premium. If the insurance company’s projections on their universal life policy do not come through, then you may have to come up with higher premiums later, have lower than expected cash values or even lose the policy.

However, a new breed of universal life policies have built in lapse protection (or secondary guarantee), which prevents the policy from lapsing, even if the cash value in the policy goes to zero. Anyone who’s looking to build cash value in a life insurance policy should look into whole life insurance, as the cash value is guaranteed. As these universal life insurance policies with lapse protection don’t usually build up any significant cash accumulation (if any), I look at them more as “lifetime term insurance.” As with term life insurance, you won’t have cash value in the policy, but you will have a guaranteed death benefit. for the term of life.

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