- Credit Card
- Real Estate
I have been reevaluating my life-insurance strategy and having remembered an article about using laddered term life insurance to give you a higher amount of coverage in the short term with reducing amounts of coverage in the long term. I am a prolific saver, and I have plenty of tax avoidance strategies in place for my long term savings, so I don’t really need a discussion of term vs. permanent life-insurance. My question is whether using laddered policies can really provide a significant savings over re-rating when shorter term policies expire.
Here’s one of many articles claiming that it can – Laddering Term Life Insurance- A Real World Example
Edit: To clarify per JoeTaxpayer answer, a little more explanation:
I first read about this concept a few years ago in a newspaper. The recommendation by the author was to replace your entire lifetime of expected earnings with insurance. If for simplicity that means $100k/yr, that would be about $1m/decade of insurance. After each decade, that money has been earned and is no longer expected, so you should reduce your insurance by the same amount. So assuming 30 years left, I would need $3m in life insurance now, $2m in life insurance 10 years from now, and $1m in life insurance for the last decade of work.
In my own case, I probably only need to cover a mortgage payoff and expenses for my wife until the children are old enough for her to be able to return to work. (She and I are both software developers, but she put her career on hold to care for our children.) I would probably buy a 10 year policy for $500k and a 30 year policy for $250k and let the first policy lapse when the term ends.