Huge jump in term life premium—is this typical?

[Anonymous]

As a naive, cautious 30-year-old I got talked into 10-year term life insurance for me and my same-age husband. His premium was $980 per year. The agent told us in writing that it would “start increasing” this year, which I took to mean some sort of gradual up-slope. Just found out the new premium is $3,600!

Thankfully we have no new health conditions and are prepared to apply for new policies as 40-year-olds.

But is this type of jump par for the course and common knowledge? We feel like idiots for assuming they would want to keep our business and increase it more modestly. I am sure I verbally asked “what type of increase can we expect”? ten years ago and this was never insinuated but of course nothing was promised…

[Anonymous]

Premiums go up at the end of the term. 10 year term = dumb idea. Find a financial planner who can give you a good idea of how long and how much. Why would you ever go to an insurance salesperson to get advise on buying life insurance? A good place to look https://www.napfa.org/find-an-advisor#

[Anonymous]

Sorry, OP — you should always assume a guaranteed level premium term life policy will be useless after the guarantee expires.

It is often priced based on the idea that you will let it lapse before the guarantee expires so it might not even be priced on ages 30-40 but on ages 30-36 or something, and then you kept it and wanted more insurance at 40.

[Anonymous]

Yeah, this is why you just bite the bullet and do the long term policy from the get go.

[Anonymous]

OP here. Thanks for the perspective. We stupidly never thought it would jump this much and that we could just keep extending.

When PP says “long term policy”, do you mean whole life? We have the option to convert to whole life and not have to reapply but we’re planning not to because 1. We figured we could just invest that amount and 2. I don’t want to give this agent another dime. Of course it’s a “family friend.”

[Anonymous]

Anonymous wrote:OP here. Thanks for the perspective. We stupidly never thought it would jump this much and that we could just keep extending.

When PP says “long term policy”, do you mean whole life? We have the option to convert to whole life and not have to reapply but we’re planning not to because 1. We figured we could just invest that amount and 2. I don’t want to give this agent another dime. Of course it’s a “family friend.”

PP when our kids were born DH and I got 30 year policies based on what we thought we'd be earning in 15 years.

[Anonymous]

Anonymous wrote:OP here. Thanks for the perspective. We stupidly never thought it would jump this much and that we could just keep extending.

When PP says “long term policy”, do you mean whole life? We have the option to convert to whole life and not have to reapply but we’re planning not to because 1. We figured we could just invest that amount and 2. I don’t want to give this agent another dime. Of course it’s a “family friend.”

Hell no to whole life. You need to talk to a financial planner to talk some sense into. A financial planner does not sell insurance but gives you advise. They could have paid for their fees time X if you started there.

[Anonymous]

Anonymous wrote:OP here. Thanks for the perspective. We stupidly never thought it would jump this much and that we could just keep extending.

When PP says “long term policy”, do you mean whole life? We have the option to convert to whole life and not have to reapply but we’re planning not to because 1. We figured we could just invest that amount and 2. I don’t want to give this agent another dime. Of course it’s a “family friend.”

NO. Whole life is a complete rip off and anyone who tells you to do it is not smart or swindling you. I'm the pp. "Long term" means when you are 30, you take out a 30 year policy figuring that by the time you are 60 your kids will be grown and hopefully your house will be paid off and your spouse will be okay without life insurance on you.

[Anonymous]

OP, how much insurance coverage is this for?

For reference, my spouse and I are in good health and both have living parents.

When we were about 30, we both got 20-year term life insurance with $1M coverage. The annual premium is <$500 per year for each of us.

[Anonymous]

$3600/yr for your DH is steep unless it’s a very long term, very high coverage, or he’s in poor health. DH and I got 20 year terms in our late 30s a couple years ago. We each pay only $600/yr. I have $1M coverage but DH has only $600K coverage. His blood pressure was a little high, and that caused him to be eligible for only the 3rd best rate.

You should shop around. It’s not fun getting your blood drawn and answering a zillion questions on the application but that will get you a lower premium than FEGLI or going with an insurer that uses less data to assess your risk.

[Anonymous]

Yes, this is how those policies are designed to conform to state regulations. The idea is that no one stays beyond the original term unless they are on their death bed, so those will be paying through the nose.

[Anonymous]

Anonymous wrote:As a naive, cautious 30-year-old I got talked into 10-year term life insurance for me and my same-age husband. His premium was $980 per year. The agent told us in writing that it would “start increasing” this year, which I took to mean some sort of gradual up-slope. Just found out the new premium is $3,600!

Thankfully we have no new health conditions and are prepared to apply for new policies as 40-year-olds.

But is this type of jump par for the course and common knowledge? We feel like idiots for assuming they would want to keep our business and increase it more modestly. I am sure I verbally asked “what type of increase can we expect”? ten years ago and this was never insinuated but of course nothing was promised…

Life insurance agent here. Yes, this is totally normal. My guess is your agent also offered you a 20- or 30-year term and you chose the 10-year instead because of the lower price. There’s no reason your agent would not have at least given you these options — not only would the agent have earned a larger commission since the policy would’ve cost you more, but as you now see, it is also in your best interest to do a longer term. (Actually, it is insane to only do a 10-year term at age 30. You’re just lucky you are still in good health so that the only fallout is that you have to go through the inconvenience of reapplying. But imagine if you had developed some major medical condition which made you now uninsurable or made the rate substantially higher.)

Here’s a tip: on your new policy, get the longest term you think there’s any chance that you will need. For example, it will be more expensive to get a 25-year term than a 20-year term, but you can always cancel it early if you don’t need it and it gives you a lot more flexibility. It’s like taking out a 30-year mortgage instead of a 15-year. Even if you plan to pay the mortgage back in less than 30 years, it gives you the increased flexibility to keep your monthly bills low and only make additional principal payments when it’s convenient for you.

Otherwise, you end up like some of my best customers, who thought they wouldn’t need insurance beyond age 60. Life didn’t turn out as they had planned, and now they need to take out a new 10-year term at age 60 — and on top of that, now their rate class is higher because they also have a history of cancer, etc. Fat commissions for me; unfortunate situation for them.

[Anonymous]

Anonymous wrote:

Anonymous wrote:As a naive, cautious 30-year-old I got talked into 10-year term life insurance for me and my same-age husband. His premium was $980 per year. The agent told us in writing that it would “start increasing” this year, which I took to mean some sort of gradual up-slope. Just found out the new premium is $3,600!

Thankfully we have no new health conditions and are prepared to apply for new policies as 40-year-olds.

But is this type of jump par for the course and common knowledge? We feel like idiots for assuming they would want to keep our business and increase it more modestly. I am sure I verbally asked “what type of increase can we expect”? ten years ago and this was never insinuated but of course nothing was promised…

Life insurance agent here. Yes, this is totally normal. My guess is your agent also offered you a 20- or 30-year term and you chose the 10-year instead because of the lower price. There’s no reason your agent would not have at least given you these options — not only would the agent have earned a larger commission since the policy would’ve cost you more, but as you now see, it is also in your best interest to do a longer term. (Actually, it is insane to only do a 10-year term at age 30. You’re just lucky you are still in good health so that the only fallout is that you have to go through the inconvenience of reapplying. But imagine if you had developed some major medical condition which made you now uninsurable or made the rate substantially higher.)

Here’s a tip: on your new policy, get the longest term you think there’s any chance that you will need. For example, it will be more expensive to get a 25-year term than a 20-year term, but you can always cancel it early if you don’t need it and it gives you a lot more flexibility. It’s like taking out a 30-year mortgage instead of a 15-year. Even if you plan to pay the mortgage back in less than 30 years, it gives you the increased flexibility to keep your monthly bills low and only make additional principal payments when it’s convenient for you.

Otherwise, you end up like some of my best customers, who thought they wouldn’t need insurance beyond age 60. Life didn’t turn out as they had planned, and now they need to take out a new 10-year term at age 60 — and on top of that, now their rate class is higher because they also have a history of cancer, etc. Fat commissions for me; unfortunate situation for them.

What would a reason? Younger children still at home?

[Anonymous]

* would be a reason

[Anonymous]

Ouch! I believe we did 30 year term at a good rate for $2 million and assumed that when we hit 60 we would no longer need it. And we were right…..thankfully. 10 year term and whole life are simply bad ideas if you are 30.