Laddering Life Insurance

Laddering is a way to save your clients money on life insurance and give them exactly the amount of coverage they need at the exact time they need it. Instead of one policy covering multiple needs, your clients will have a separate policy for each need. How does this work? Let me show you an example:

Sample client, married, two children, one mortgage

Let’s say you conducted a needs analysis for a male age 35 and determined he needs $1,000,000 of life insurance for 30 years. Assuming the best health class, the price would be $814 per year. Does your client really need the entire $1,000,000 for all 30 years? What if he has a ten year old child he expects to be independent at age 20? $250,000 may only be needed for the next 10 years. Let’s assume he also has a 5 year old and needs another $250,000 until that child’s age 20 (15 years). He purchased a home with a 30 year mortgage 10 years ago and owes another $250,000 for the next 20 years. Finally, he plans to retire at age 65 and his wife needs the remaining $250,000 for income replacement for 30 years.

How to save $10,000

When you add up the premiums for $250,000 each of 10, 15, 20 and 30 year term the price is only $673.60 per year. That’s a 17% savings for the client. But wait, there’s more! In year 11 when the 10 year term expires, his price drops to just $559.50. In year 16 it drops to $430.50 and in year 21 it drops again to $269.00. That’s a total premium savings of $10,004 over 30 years, a 41% savings over that same time span!