The Life Insurance Ladder Strategy

July 15, 2021 | Tom Peterson

As you age and reach new life milestones – marriage, homeownership, the birth of a child, retirement – your life insurance needs will change too. This can create a challenge. You don’t want to pay for more coverage than you need. But because the cost of life insurance increases with age, you’ll end up paying more if you wait to buy additional coverage. The life insurance ladder strategy can help ensure you have the right coverage when you need it.

What Is the Life Insurance Ladder Strategy?

The life insurance ladder strategy involves taking out – laddering – multiple different term life insurance policies. (As a reminder, term life insurance covers a specific number of years, and pays a benefit if the insured dies during that time.)

You’ll strategically time the insurance terms so that each expires at a specific date. This will ensure that you pay for the coverage you need – and no more – while maintaining sufficient financial coverage for your loved ones.

For example, if you pay off a large debt such as a mortgage, you no longer need life insurance in an amount that could cover that mortgage. So, it may make sense to get a term life insurance policy that ends when you make the final mortgage payment.

However, you don’t want to get a new policy at that point, because you will be older. As a result, you will likely pay more. Instead, when you take out the initial shorter-term policy, take out one or two additional policies. These policies should have a longer term but a smaller amount. This will meet your changing needs without greater costs down the line.

What are the Benefits of the Ladder Strategy?

If the life insurance ladder strategy is properly implemented, it can save a good deal of money, while ensuring that you have the right coverage to meet your needs at any given time.

Who Should Not Stack Their Life Insurance Coverage?

The ladder strategy works best for individuals with predictable financial futures. You’ll need to estimate how much coverage you’ll need at a given point and be able to make a fairly solid plan. It’s best to enlist a financial planner or experienced insurance broker to ensure that your needs will be met.

Choosing a life insurance plan can be difficult. Working with an insurance broker can help you find a plan that fits your needs. Schedule a one-on-one meeting with one of our Minneapolis insurance brokers to get your insurance questions answered!