30 Year Term Life Insurance

30 year term life insurance is a form of temporary life insurance that lasts 30 years. Its features and benefits can be compared and contrasted with those of permanent life insurance, on the one hand, and those of shorter-duration term life insurance policies on the other.

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Term life insurance policies are most often offered with durations of 5, 10, 20 or 30 years. Less common are the 15- and 25-year durations. Recently, a few companies have begun offering a range of term life policies with durations of 10, 12, or any number of years between 15 and 30. By far the most popular premium structure is the level-term premium, which remains the same for all years of the policy. The alternative, annually renewable term (ART), features premiums that increase every year of the policy to account for the increased risk of death to the insured. The general rule of thumb is that premium rates are higher, the longer is the duration of a level-premium policy.

30 Year Term Life Insurance Compared to Permanent Insurance

The underlying basis for preferring 30 year term life insurance to permanent insurance, such as whole life, universal life, variable life or variable universal life, is that many insurance needs are long-lived but temporary. The most common insurance need is for replacement of a breadwinner’s income in the event of unexpected death. When children are born, it takes at least 21 years for them to grow up and earn high-school and college degrees. After that, they earn their own income and the insurance need expires. 30-year mortgages are the most common type; when the mortgage is paid off, the insurance need expires. The need to replace income ends with retirement, but the average working life is well over 30 years. All of these common, temporary insurance needs argue for term-life policy duration at, or close to, 30 years.

Permanent life insurance policies will typically have premiums that are some multiple of the premium on a 30-year term life insurance policy with the same death benefit. This substantial premium differential can be invested by the term-life policyholder in order to earn a sum of money larger than the cash value of a permanent life insurance policy. Equally important, perhaps, is the ability to meet insurance need. Selecting a death benefit high enough to meet the household’s full insurance need may push the permanent-life insurance premium beyond the policyholder’s financial reach. The lower term-insurance premium gives policyholders their best chance to fully fund their insurance need. Since nobody can precisely forecast the need for insurance over a 30-year time period, however, consideration should be given to a term policy offering the option of conversion to whole life at end of term.

30 Year Term Life Insurance Compared to Shorter-Duration Term Insurance

The prevalence of long-lasting insurance need affords an inherent advantage to 30 year term life insurance over its shorter-lived brethren. Households will usually possess one of the common insurance needs described above. Purchase of a 10- or 20-year term life insurance policy would leave the insured needing additional coverage at expiration of the policy and perhaps needing to pass a medical examination to verify insurability. The renewal premium is certain to be significantly higher than the original. In contrast, the 30-year policyholder won’t be troubled by renewal exams or higher premiums for 30 years. By the time the policy term ends, the policyholder may have acquired enough personal wealth by this time to “self-insure” and compensate dependents.

Here, it is the shorter term policy that will have the cheaper premium rate. If the premium differential is large enough to allow full insurance need to be met by the shorter policy, this might shift the balance in its favor.

Suitable Candidates for 30 Year Term Life Insurance

Young marrieds will constitute the largest customer class for 30-year term life insurance policies. Their insurance need is greatest and their incomes are the lowest at this time of life, so they benefit the most from the comparatively low premium rates offered by the term policy. However, anybody with an insurance need that is both temporary and long-lived should consider this product. Because insurance companies are reluctant to provide term insurance that extends past the insured’s age 75 or 80, 30 year term life insurance will become difficult to acquire and afford past age 45 or 50.

Some business-insurance needs lend themselves to lengthy term-insurance policies. Death, disability and retirement are the contingencies met by business life insurance. A sole proprietor is personally liable for the business’s debts and may wish to offset this risk to his family’s wealth with life insurance. The proprietor may also wish to provide the means for a specified beneficiary to buy out his or her interest in the business from his survivors, thus perpetuating the business. Under certain conditions, 30 year level term insurance may be the cheapest and best route to those goals. Disability would also imperil the well-being of the proprietor’s family and a term policy may include a waiver of premium rider that would apply when the insured becomes fully disabled. These insurance needs may expire with the proprietor’s retirement, which makes term insurance a possible solution.

All of the foregoing insurance needs may also apply to alternative business forms, such as partnerships, LLCs and standard corporations. In addition, the business may be well-served by insuring the life of a key employee. An important consideration with “key person” insurance is the duration of need, which may be either permanent or temporary. A temporary need would likely expire with the key employee’s retirement, making 30 year level term life insurance a likely choice to meet the need.

Purchasing 30 Year Term Life Insurance

For many years, insurance sales were effected on the basis of a personal relationship between insurance agent and customer rather than by comparing alternative products. Comparisons were hindered by the absence of comprehensive information on prices and policy options. Today, computers and the Internet can deliver all the information needed to compare the products of different companies. Independent agents specialize in putting information on term insurance at the service of consumers. Term life insurance is a homogeneous commodity, like a particular grade of wheat or oil. This wealth of information allows the would-be term-insurance buyer to scrutinize prices, policy details and financial strength of life-insurance companies. The fullness of disclosure keeps prices of term insurance low and affordable. This, in turn, allows the consumer to locate the best policy and fully meet a particular insurance need.

Summary

30 year term life insurance has many advantages compared to its competitors, permanent insurance and shorter-term insurance. Many common insurance needs are both temporary and long-lived, making a 30 year term life insurance policy a perfect fit for them. Cheaper premium rates provide an advantage over permanent insurance. The better time-match of duration to need and avoidance of re-qualification confer an edge over shorter-term policies. Technology has midwived unprecedented advantages for the consumer in comparing term life insurance policies. The information revolution allows young married couples and businesspeople to fully fund their insurance need.

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