30 Year Term Life Insurance
The 30 year term life insurance plan is most popular with individuals ages 20 to 49. It is as simple to understand as any other other term life insurance and offers some of the longest rate guarantees.
How does the 30 year term life insurance plan work?
As its name indicates, this plan offers a limit on the amount of time that rates will be guaranteed to be level or projected to be level. What we mean by guarantees or projections is that if the plan specifically states that rates are guaranteed for 30 years then, unless you cancel the insurance or you do not pay the premiums, your rates will be guaranteed for 30 years. You should be aware of 30 year term life insurance plans that only give you a projected guarantee period or only guarantee rates for a period shorter than 30 years. If the plan does not guarantee rates for the full 30 years , the insurance company may be allowed to raise your rates after the guarantee period (which can be anywhere between 1 and up). If rates are not guaranteed for the full 30 year term period, they can be raised very high.
We strongly recommend that you always select a 30 year term life insurance plan that will guarantee rates for the entire 30 year period. After all, you most likely selected this plan because rates were low to start with. You don't want to be hit with high rates halfway through the plan period.
What is convertibility of a 30 year term life insurance plan
As with any term plan, you want to make sure that the plan is convertible. What that means is that, if during the first ten years of the policy you decide that you would rather have a permanent life insurance (universal life or whole life), you can just convert your term life insurance plan by just filling out a simple request form. Please note that term life insurance, as we have seen, as never been convertible to another term life life insurance. In other words, you cannot convert a 30 year term life insurance to a 20 year term life insurance plan or a 15 or 10 year term.
A main reason to make sure that the convertibility option is available is health changes. Should you develop health issues during the period that your policy is in force and you find out that no one will now cover you for life insurance or rates would be very high even if approved, you want to make sure that your present 30 year term life insurance is convertible to either whole life insurance or universal life insurance. This will allow you to lock in your original approved rating for the rest of your life.
Many 30 year term plans limit the amount of time during which you can exercise the convertibility option. Some companies limit this option to the first five years of the policy, some allow it within the first ten and very few allow it after 30 years. Please read your policy carefully and try to select the plan that offers you the longest convertibility period at reasonable rates.
When to select the 30 year term life insurance plan?
Uses of this plan are very varied. The most common uses are:
-
Shorter term needs (shorter than lifetime) - if you take out a loan and the length of this loan is 30 years, then this plan may be the best and most affordable. We often see 30 year term plans used as mortgage protection. In these situations, a borrower wants to make sure that the loan gets paid off in case of premature death of the borrower(s).
-
Very Long term needs Unaffordable - in a situation where the need is very long term but rates for a more permanent plan would be unaffordable, the 30 year term life insurance is a good choice. It allows for the coverage to be in place until the insured is able to switch to a more appropriate plan.
-
High amount of insurance needed - Similar to the reason above, in this case, if your need is for a very large amount of life insurance, getting a whole life insurance policy may not be affordable yet. Since t is better to focus on the amount needed, rather than the guarantee period of the plan selected (or the cash value), a 30 year term life insurance plan may be a better choice as it allows for a lot of insurance coverage at much lower premiums than with a whole life insurance or universal life insurance.
We hope this helped you get a better understanding of the 30 year term lie insurance plan and it's uses. Please always feel free to ask us questions. Answers are always FREE and very fast.
