Term life insurance duration

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:I actually think almost everyone here is wrong. A 20 year is what you need and want. The extra $50 is effectively gambling for a return. If you want to do that I have no objection, but recognize it for what it is.

This guy is correct. You are not insuring against a possible liability beyond 20 years. Your mids will be well established. you are just speculating on your own death.

No. Risk/reward says you take the longest term you could plausibly need.

I’m the broker PP and I can’t tell you how many times people develop some major health condition before the end of their term and still need insurance beyond this term for a variety of reasons.

As an example, I had a guy who was diagnosed with cancer one year before the end of his term. Therefore, he would be uninsurable for many years even after remission, if he were to in fact survive the cancer. He was well-off but still had loans in his business and wanted/needed life insurance to provide some liquidity in the event of his death.

Since he was uninsurable, the only way to extend coverage was to do a conversion of his existing term policy into an indexed universal life policy (which is contractually guaranteed even if one’s health changes). His premium went from $4,000 per year on the term policy (he was a smoker) to about $20,000 per year on the universal life policy. It was great for me – I made a $22,000 commission on that sale – but it was a totally avoidable situation for him if he had just done a longer term. (He initially did a 10-year term at age 50, thinking he probably would not need coverage beyond age 60).

And of course, as others have mentioned, even if you get a 30-year term, you can always drop it after 20 years if you no longer need it. Trust me, there’s no scenario in which the risk/reward calculation does not heavily favor buying the longest term you might plausibly need.

.

Brokers are literally the last people I would trust on this since they have a vested interest in selling as much insurance as possible. I therefore don’t trust you. And as an economist I am very familiar with risk/reward calculations, and I assure you that you are wrong.

You got me – I have a huge vested interest in whether some rando on the internet spends an extra $50 to buy a 30-year term from someone else.

By the way, I explained in detail why there’s a large asymmetric downside risk in doing a shorter term. You’ve asserted that shorter terms are better – care to provide your risk/reward analysis, or are we supposed to take your word for it because you happen to be part of a profession that gets almost everything wrong?

DP. The reason for buying life insurance is to protect your loved ones from a financial disaster if you die, like your spouse and small kids losing the house. After 20 years, the risk of this disaster for most people is much reduced with kids out of the house, mortgage paid off, etc. So, a 30 year policy doesn’t make sense for most people but it can make sense for some with special circumstances.

[Anonymous]

Need to think about if the insurance company that you buy your policy from is still in business when you need it.

[Anonymous]

You are insuring against a specific set of risks. Anything you insure beyond that is just glorified gambling.