Stacking Term Life Insurance Policies

Should you or your spouse pass away, would your family have the means to continue to make the mortgage payment or even put dinner on the table?

When breadwinners pass away, many families not only have to deal with the grief of their loss, they unfortunately have to figure out how to continue to pay their bills.

Term Life Insurance

That’s where life insurance can truly make a difference. Term life insurance – the type we recommend at Strategic Income Group – provides a lump sum of money to the beneficiaries of a policyholder should the policyholder pass away. Keep in mind that this benefit is only paid out if the policyholder passes away during the term. There are a wide variety of terms to choose from; for example, if you’re a 35-year-old man you might pay a monthly premium of $223.56 for a 30-year, $2,500,000 level-term policy.

The lump sum of money (in this case, $2,500,000) can be used for paying off debt, investing, or anything else the beneficiaries wish to do with the money. The Tale of Two Couples goes over whether or not paying off the mortgage early might be a good idea – be sure to take a look.

$2,500,000 should be enough money to replace an annual income of $100,000 if it’s in investments (I’m also adjusting for inflation). At the retirement age of 65, there should no longer be a need for this insurance as there should be retirement portfolios with enough money to provide income going forward.

There’s one more great strategy when it comes to purchasing term life insurance . . . .

Stacking Policies

Let’s take the same example above – a 35-year-old man who wants enough insurance to last up until retirement – and see how “stacking policies” works.

Instead of purchasing one 30-year policy, he could purchase five policies with different terms and premiums:

• $500,000 10-year policy for $21.88 per month
• $500,000 15-year policy for $26.69 per month
• $500,000 20-year policy for $32.38 per month
• $500,000 25-year policy for $43.75 per month
• $500,000 30-year policy for $48.56 per month

For 10 years, there would still be $2,500,000 of coverage after which it would be reduced by $500,000 and again by the same amount every five years. Over time, the coverage would drop, but so would his premiums.

In fact, starting out, the policies would only cost a total of $173.26 per month. This is cheaper than first example by $50.30 – this money could be used toward other financial goals.

Assuming that this man has completed Phase I: The Foundation Phase, he could start investing the savings and probably get an 8% return every year. We completed the calculations and found that at this rate of return after 30 years, the investment balance would be $102,009.78. Not only would he still have adequate – albeit less – insurance over 30 years, he would have a nice nest egg as well (something that buying a 30-year term only wouldn’t provide).

Let Us Shop Insurance Companies for You

We would like to help you shop insurance companies. We typically quote 20 of the best and highest rated insurance companies so we can get the best deal for clients. We are independent life insurance agents and can customize the appropriate amounts and terms to fit your needs.

Term Life insurance

Simply fill out the form and we’ll contact you with more information. We’re excited to show you how you can cover your family and save money at the same time.